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Good day, ladies and gentlemen, and welcome to Reata Management Call to Discuss Second Quarter Financial Results and an Update on Development Programs. [Operator Instructions]
Before the Company proceeds with its remarks, please note the forward-looking statements disclosure in the Company's press release. The Company will be making forward-looking statements on today's call. There are many factors that could cause results to differ from expectations, included 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, August 8, 2018, and may no longer be accurate at the time of any webcast replay or transcript rereading. And audio recording of today’s webcast will be available shortly after the call today on Reata’s website at reatapharma.com in the Investor and News section.
Following the prepared remarks, we will open the call up for questions. [Operator Instructions]. I would now like to introduce your host for today's conference, Vinny Jindal, Vice President of Strategy. Please go ahead.
Thank you. Hello and welcome to Reata management’s call to discuss Reata’s second quarter financial results and to provide a review of our development programs. This afternoon, we issued a press release with a summary of these results, and the press release can be found on the Investor and News section of our website at reatapharma.com. I’m joined today by our Chief Executive Officer Warren Huff; our Chief Medical Officer, Colin Meyer; and our Chief Financial Officer, Jason Wilson.
I'll now turn the call over to Warren.
Thanks, Vinny. Good afternoon, everyone, and thank you for joining us for our quarterly call.
As most of you know, we are developing bardoxolone for the treatment of severe and rare forms of chronic kidney disease where renal inflammation and fibrosis are key drivers of kidney function loss and kidney failure, are lead programs in Alport syndrome patients in our CARDINAL Phase 2/3 study. Additionally, we’re conducting the PHOENIX trial, an open label Phase 2 study enrolling patients with four additional rare forms of CKD, including ADPKD, IgA nephropathy, FSGS, and CKD caused by type 1 diabetes.
In July, we announced one year data from the Phase 2 portion of CARDINAL, as well as the full data for the ADPKD cohort of PHOENIX trial. Data from CARDINAL demonstrated that bardoxolone produced long-term improvements in kidney function in Alport syndrome patients who were actively declining while on standard of care. Furthermore, the significant retained eGFR benefit observed in this trial, underscores the point that kidney function improvements produced by bardoxolone have the potential to delay or prevent dialysis in these patients. These data also suggest that the Phase 3 portion of CARDINAL is conservatively powered to show a statistically significant improvement in retained EGFR benefit compared to placebo, which is the key endpoint for approval by the FDA. We continue to expect topline data from the Phase 3 portion of CARDINAL to be available in the second half of 2019.
During July, we also announced that ADPKD patients in our PHOENIX trial experienced significant improvements from baseline in eGFR after 12 weeks of treatment with bardoxolone. In diabetic CKD and now Alport syndrome, 12-week eGFR improvements for bardoxolone treatment correlated with long-term kidney function improvements. As a result, the 12-week EGFR improvements observed in ADPKD patients suggest that the long-term eGFR improvements observed in other forms of CKD may translate to patients with ADPKD. In light of this finding, we’re developing plans to advance bardoxolone into a pivotal clinical program in ADPKD.
With respect to our other CKD studies, we completed enrollment in the IgA nephropathy and type 1 diabetic CKD cohorts of PHOENIX in the second quarter. And we expect full primary endpoint data from these cohorts to be available during the third quarter of this year. Full primary endpoint data from the FSGS cohort are expected to be available in the first half of 2019.
Turning to our second registrational program. We’re studying omaveloxolone, our second generation Nrf2 activator in an ongoing pivotal MOXIe trial for the treatment of Friedreich's ataxia. The MOXIe study is proceeding as planned and we continue to expect topline pivotal data from the study to be available in the second half of next year. Based on the results observed in part one of MOXIe and the design of the pivotal part two of MOXIe, we’re optimistic that omav will become the first approved therapy for patients with FA.
Our third pivotal study is the CATALYST trial of bardoxolone in connective tissue disease associated pulmonary arterial hypertension or CTD-PAH. This study is also proceeding as planned, and we continue to expect topline data from the study to be available in the first half of 2020. Based on the results observed in our Phase 2 LARIAT trial and the design of the CATALYST trial, we’re optimistic that bardoxolone will become the first therapy approved specifically for patients with CTD-PAH.
With that overview, I will now turn the call over to Jason to provide a summary of our financials for the quarter.
Thanks, Warren.
As mentioned earlier, this afternoon, we reported financial results for the second quarter of 2018. Our net loss for the quarter was $28.2 million or $1.08 per share, compared to a net loss of $11.6 million, or $0.52 per share for the same quarter last year. The increased net loss for the three-month period is primarily driven by four factors.
On the revenue side, there was a decrease in revenue due to a previously deferred revenue, related to a license agreement being fully recognized in 2017. On the expense side, we saw an increase in research and development expenses related to clinical and manufacturing activities. In this quarter, we also had general and administrative expenses and fees, specifically related to the milestone receivable that we recorded, which increased our G&A expense. And due to the change to our debt agreement, we recorded an extinguishment of debt in this quarter as well.
At June 30, 2018, we had a little under $139 million in cash. And in July, of course, we closed an equity offering with the net proceeds of approximately $233 million. Based on our current cash, we believe that cash and cash equivalents and expected milestone payment from KHK, our Japanese partner, will be sufficient to fund our operating expenses and capital expenditure requirements into 2021.
And with that, I will turn the call back over to Warren.
Thanks, Jason.
At Reata, our mission is to develop small molecule therapeutics with novel mechanisms of action for severe orphan diseases with no effective therapies. We conduct a battery of Phase 2 studies looking for meaningful improvements in clinical parameters, and we set a high bar for advancing programs in the pivotal studies. This approach has produced our current pipeline of three promising registrational programs in Alport syndrome, Friedreich's ataxia and CTD-PAH, a fourth program in PKD that is transitioning to a pivotal Phase 3 study, and a series of additional Phase 2 proof of concept studies that provide expansion opportunities in our key therapeutic areas of nephropathy and neurodegenerative diseases.
Over the course of the next 18 months, we expect to generate significant news flow including the full results from the IgA nephropathy, type 1 diabetic CKD cohorts of the PHOENIX trial this quarter, the full results from the FSGS cohort of PHOENIX in the first half of 2019, and top line pivotal data from our registrational studies in Alport syndrome and Friedreich's ataxia in the second half of 2019.
With a strong balance sheet and a portfolio of ongoing pivotal programs, the Company is well-positioned to produce positive Phase 3 data and commercialize one or more groundbreaking therapies for underserved orphan diseases in the coming years. We look forward to updating you soon on our progress.
That concludes our prepared remarks. And I’ll now turn the call over to the operator for questions.
Thank you. [Operator Instructions] Our first question comes from Maurice Raycroft with Jefferies. Your line is now open.
My first question is just -- trying to pin out differences between the rare kidney diseases you're pursuing with bardoxolone. I'm wondering if you could talk about different types of collagen IV mutations which are found in Alport syndrome in males and females, and I believe in FSGS too. And how these mutations may influence the spectrum of kidney disease and also any thoughts on prevalence?
It’s Colin. So, yes, there is a spectrum of mutations of type IV collagen that result in Alport syndrome that occur both in males and females. There’re several different inheritance patterns, and that defines the rate of progression. What's now known is that females are affected just as much and likely more so than males. Even though, Alport syndrome is thought to be by some, just male-only disease. And so, males may be affected earlier in their life, the males with X-linked disease are -- reach end-stage disease by a mean age of 25. Importantly, patients with autosomal recessive disease, which is equally in males and females, reach at a similar timeframe. Females with X-linked disease are actually more common than males with X-linked disease and they tend to reach the ESRD in their 60s. But, it still obviously affects their life.
And so as far as number of patients and so that the -- we estimate with Alport Syndrome Foundation that there are 30,000 to 60,000 patients who have Alport syndrome in the U.S. The Alport Syndrome Foundation believes that perhaps up to a third of patients with FSGS actually have Alport syndrome. Furthermore, many of the Alport syndrome key opinion leaders have published recently that there's likely a fairly large set of patients who have Alport syndrome but are misdiagnosed as having thin basal membrane disease. And so, that's -- we’re trying to explore that right now to figure out how big that population may be. But, that would provide a potential substantial increase in the numbers.
Helpful. And any thoughts on how that could influence trial design? I guess, are these patients in the current Phase 3, and could they be included into an FSGS trial?
So, if patients have a type IV collagen mutation, they are allowed in our trial. And so, if they’re misdiagnosed as having something else, such as thin basal membrane disease or FSGS, if their genotype have been found to have a type IV collage mutation, they’re allowed in our trial. So, our trial does contemplate those patients. And so, we had a campaign recently with several of our top enrolling sites to investigate patients who may have suspected Alport syndrome, and there is a common, oftentimes young male with blood in the urine who looks like an Alport syndrome patient but just did not have the genetic workup. And so, we’re exploring to figure out how common those patients may be but estimate suggests, it’s a meaningful increase in the numbers that I mentioned, 30,000 to 60,000 patients in the U.S.
Thank you. Our next question comes from Adam Walsh with Stifel. Your line is now open.
Just a follow-up to Maurice’s question a moment ago. In looking at the reclassification potential for these collagen disorders, just potentially Alport syndrome that could be obviously very meaningful in terms of the size of the thin basement pathology. That’s reclassified obviously as Alport that greatly expands the market. There's been some talk amongst KOLs about trying to reclassify these thin basement membrane patients as Alport. Is that just talk right now, Colin, or is there some kind of push in guidelines or diagnostic push in order to get this reclassification done or is this just really conversations amongst KOLs at this point?
It’s clearly more than simply conversations amongst KOLs. There are some I would say formal guidelines in the academic community where they are suggesting that these patients in fact do have Alport syndrome. And I think there is -- you need to differentiate between two distinct patient populations. One is patients who are diagnosed on the basis of a clinical diagnosis with a basically histological finding that appears to be in basement membrane disease. But many of those patients actually have type IV collagen mutations and therefore have Alport syndrome. It’s not really a reclassification, it’s just a proper diagnosis, now that there is a molecular genotyping tools in order to actually correctly diagnose these patients. There is a second set of patients who have mutations and other proteins that are not type IV collagen but also important for integrity, the filtration barrier in the kidney. And so, I think there is some suggestion and some work to determine that those patients should we be formally be classified as having Alport syndrome. That’s probably a smaller component. But, based upon the prevalence of the mutations and type IV collagen, it appears to be much more common, in part because these patients simply aren't diagnosed correctly.
Thanks for that. And then, if we could just get any more granularity, if you have it, on the timing design and kind of duration of Phase 3 ADPKD trial launch?
So, I think as we mentioned, when we announced the PHOENIX data recently, we’re actively planning to move that program into a pivotal Phase 3 trial. And so, we’re undergoing the process right now. We’ll provide formal guidance in the next few months. And I think an important consideration is data from the rest of the PHOENIX cohorts, and as we’ve stated, we’ll have data from the IgA nephropathy and type 1 diabetic CKD cohorts this quarter. And so, I think we’ll have more guidance once we have those data and have a little bit more time to plan.
Thank you. Our next question comes from Yigal Nochomovitz with Citigroup. Your line is now open.
Recently, the FDA had issued some documents related to target to surrogate endpoints for ADPKD, which I am sure you’re familiar with, and one of those was kidney volume. I am just wondering if that's something that you would consider in your design sort of Phase 3 to potentially get accelerated approval.
So, that could be, Yigal, a surrogate. But FDA has already also said that they’ll take eGFR as an endpoint for full approval. And so, the only precedent in the U.S. for an approved product is from Otsuka's tolvaptan which was approved in April of this year. That company conducted two Phase 3 trials. The first trial, the TEMPO 3:4 trial actually had total kidney volume as the primary endpoint and FDA did not accept that data for registration in the U.S. And they required the company conduct a second trial, the REPRISE trial that was 12 months in duration and then had a two-week off treatment eGFR assessment for full approval. That’s the same endpoint that we were given for Alport syndrome in the CARDINAL trial. FDA gave us that endpoint for accelerated approval at one year and full approval for two years. And so, we think that for us, based upon the powering assumption, it’s much easier to show a difference in eGFR. We’ve already seen it. And really, the total kidney volume is more of a surrogate of a surrogate. And so, the eGFR data are much strong and I think are clearly more important to the regulators, especially here in U.S.
And is there anything on the biology related to ADPKD that would suggest that the retained benefit that you might observe in that setting would be different, either better or worse than what you’ve just shown in the Alport study?
No. I think, there’s a few reasons to suggest why we think it’d be similar. Number one, if you simply look at the literature and the role of inflammation in Alport syndrome, in PKD, there’s actually stronger data demonstrating that inflammation is important in PKD versus Alport syndrome…
And in particular the Rel/NF-kappaB, which is suppressed by bardoxolone activity.
Yes. So, the biology is actually stronger, pharmacology and PKD, and then furthermore just the clinical data. And so, we clearly see acute improvements in kidney function and patients with PKD that are similar in magnitude in absolute relative terms to Alport syndrome as well as the diabetic data that we’ve generated as well as the interim IgA data. And so, we think that it’s likely that we’d see a similar fact. And so, from our perspective the CARDINAL like design should be palatable to FDA for registration for two reasons. Number one, because that’s design that they have required for tolvaptan, and it's a design they gave us for CARDINAL.
And then, just pressing on some of the themes from the earlier questions regarding the size of the markets you’re going into such as in Alport, and obviously one that’s much, much bigger than any of those is type 2 diabetes, CKD. And maybe you haven't done that because of the pricing dynamic in that setting, but is that something that is on your long-range plan or you’re going there?
This is Warren. I'll address that. It's obviously a target indication. The two prior studies were quite validating terms of the effects of the drug in that patient population. Of course, as you know, our partner, Kyowa Hakko Kirin in Japan is conducting a Phase 3 registrational study in type 2 diabetic CKD, and they’ve adopted in that study the newly validated or standardized guidelines for margin and trials. So, the data from that study would have endpoints that would likely be adopted outside of Japan, both by the FDA and by Europe. And so, at this point, we're going to execute our plan to work through these rare renal diseases and launch the product into these rare forms of the disease, which collectively represent a very significant market opportunity. And then, at some point, we will decide whether it makes sense to develop the product for the broader type 2 diabetic CKD or for that matter even products markets, for example, for hypertension induced CKD.
Our next question comes from Joseph Schwartz with Leerink Partners. Your line is now open.
Couple of financial questions. We hear a lot -- first and then, a clinical question. How much do you expect each of your Phase 3 kidney programs for bardoxolone, the cost, and how many would you expect to pursue?
We haven't really ever given specific guidance on the cost of the trials, but I can say that they are extremely cost efficient. These are rare disease trials and come with small patient populations and efficient trial designs. In terms of how many we might pursue, that’s something that we would be announcing as the data for the various trials come in.
Right. But, as we have said, we’re now planning to pursue a trial in ADPKD, and we will give guidance late this year or next year, on the timing of that study after we get -- after we have an opportunity to go through the regulatory interactions. I will just add to Jason's comment. These are not expensive on a per patient basis, there is not the complicated and expensive imaging, for example, involved in the studies. It’s pretty much routine clinical visits and clinical chemistry based endpoints. So, they are really just driven by the numbers and they’re not a large impact.
And then, how do you think about pricing across so many different size markets, which when you add them together, get quite large and outside the realm of orphans?
Sure. Of course, the five additional rare -- out of the five rare forms of CKD that we’re conducting the programs in, the lead Alport syndrome is probably the least prevalent of the group. It’s also one of the most severe forms. So, obviously, if that were the only thing we were doing, it would support probably the highest price. PKD among the rare forms, probably at the other end of that spectrum, with a prevalence of 400,000 and 600,000, diagnosed population of approximately 120,000 patients in the U.S. And so you can think about range of pricing for -- by the way, I would add, so the endpoints given us by the FDA for Alport syndrome would reflect disease modifying activity. And so, in Alport, there’s no approved therapy and it is a deadly disease. So, you can imagine pricing would be consistent for the first approved therapy with disease modifying activity in a rare deadly disease. And then, as we expand the label, I would expect over time, frankly, have the pricing fall in line with the expanded opportunities.
And then, does GFR progress or decline linearly?
And by the way, just one last thing, you may or may not be aware, the tolvaptan for PKD is kind of one benchmark. They just priced it at a $170,000 annually in the U.S.
My last one is, just clinically, does just GFR decline linearly throughout all these diseases or is there a point where it tends to accelerate or fall off a cliff? And can you show that you're able to prevent patients from declining below certain thresholds, such as that which is indicates dialysis is necessary? Like a responder analysis?
So, across these different forms of CKD, there’re different rates of progression. They are typically between 1 to 5 or 6 ml per minutes on average. In those that we’re studying I’d say are probably between the 2 to 4 primarily. We’ve already of course released data showing that in Alport syndrome, the annual loss prior to entry in trial was 4.2 ml per minute per year. Those patients typically start losing kidney function, very early o in their life. And it’s fairly linear for PKD. In the three years prior to the patient's entering PHOENIX trial, they often 4.8. It is not exactly linear in PKD, it's usually patients have fairly stable kidney function for perhaps the first two decades of life. And then there's fairly linear decline. And it’s not a like fall off a cliff and lose extreme amounts in a very short period of time. This is range of 4 to 5, prior studies have shown 3 to 5. And then for IgA and type 1, we expect to be slightly lower but still fairly meaningful.
And so, our trials are adequately powered to show improvement in kidney function at 12 weeks in a PHOENIX program -- any one or two trial, we expect to be able to show separation from placebo or whatever the rate of decline.
And far as showing differences in certain thresholds, it really depends upon the trial design with what’s most important to FDA is showing for us disease modifying activity, showing improvement off treatment. The most important threshold is obviously a patient going on to a kidney transplant or dialysis with a GFR of less than 15. And in rare forms of CKD those trials are not feasible, they typically require a couple of thousand patients minimum to show the difference. And so, that's why FDA has worked to adopt these eGFR based endpoints for approval.
Thank you. Our next question comes from Brian Skorney with Baird. Your line is now open.
This is Trevor for Brian thanks for the question. I’m just wondering if you lay out the timeline for AbbVie's opt in [ph] and what are current thoughts on getting back the ex U.S. rights from them, and whether AbbVie’s rights are transferable to another company?
So, just to summarize where the commercialization rights are, we’ve obviously retained all of the commercial and economic rights in the United States. Our partner Kyowa Hakko Kirin has commercialization rights in Japan and Southeast Asia. And then AbbVie has an option to commercialize the product outside of the U.S. in the Kirin territories. And they have an opportunity to elect to commercialize the product as late as the availability of the Phase 3 data from the Alport syndrome trial. So, they will have an opportunity to elect in at that time. We expect that one or three things will happen, they will elect in and we will launch the product in the rest of world territories that I mentioned. We will make arrangements for either ourselves to launch in those territories or place the rights with a substitute partner for AbbVie.
[Operator Instructions] Our next question in queue comes from Matt Kaplan Ladenburg Thalmann.
I just wanted to zero in a little bit on the IgA nephropathy and type 1 diabetes CKD data from PHOENIX study coming out soon given the consistency of the results that we’ve seen. Can you just help us to get a sense in terms of what we should look for or expect in terms of change in EGFR in those two etiologies of CKD?
So, I think we’re looking to see improvements in kidney function that look real and clinically meaningful. So, as I mentioned, it’s going to be different historical rates of decline across these indications but all will be meaningful we believe and then we may see different magnitudes of increased. But I think our threshold has always been if we see more than a few-point increase in GFR, that to us demonstrates that drug is affecting the underlying inflammation is improving kidney function. And obviously the value propositions for patients is that if we can increase kidney function, stabilize it, patients may never need dialysis or kidney transplant if their kidney function isn’t falling. And so, it’s less about the absolute increase and more about is there any increase that would be clinically meaningful. And so that’s what we’re looking for. And we wouldn’t expect the exact same number and we just want to see an increase that appears real and meaningful.
Thank you. I am not showing any further questions in the queue at this time. This does conclude our Q&A session. I would now like to turn the call back over to Vinny Jindal for any closing remarks.
Thanks, David and thanks to everyone for dialing in today. We look forward to updating you again soon. Take care.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. There will be an audio recording available shortly after this conference on -- after this conference call on Reata’s website reatapharma.com in the Investor and News section. You may all disconnect. Everyone, have a great day.