© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
This means that the stock is removed from a stock exchange and can no longer be traded.
Delisting typically occurs when a stock no longer meets exchange requirements. Other reasons for delisting may include legal violations, bankruptcy, a decrease in the number of shareholders, and acquisition by another company.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day, ladies and gentlemen, and welcome to the Reata Third Quarter Financial Results and Update on Development Programs conference call. At this time, all participants are in a listen-only mode. [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, 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, November 7, 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 questions. [Operator Instructions] I would now like to introduce your host for today's conference, Vinny Jindal, Vice President of Strategy. You may begin.
Thanks Demetrius . Hello and welcome to Reata management’s call to discuss our third quarter financial results and to provide a review of our development programs. This morning, we issued a press release with a summary of these results, and the press release can be found on the Investors 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 morning, everyone, and thank you for joining us for our quarterly call.
I will begin today's prepared remarks with a brief overview of our development programs and the progress that we have made in advancing our pipeline since the last quarterly call. After that I will turn the call over to Jason for a review of our financial results for the quarter.
Reata is conducting three ongoing pivotal studies, the CARDINAL study of Bardoxolone in patients with Alport Syndrome; the MOXIe study of omaveloxolone in patients with Friedreich’s ataxia; and the CATALYST study of bardoxolone in connective tissue disease associated PAH.
In addition, we are conducting the phase 2 PHOENIX trial for Bardoxolone in four additional rare forms of CKD where renal inflammation and fibrosis are key drivers of kidney function loss and kidney failure that include ADPKD, IgA nephropathy, FSGS, and CKD that is caused by type 1 diabetes.
In July, we announced one year data from the Phase 2 portion of the CARDINAL study, as well as final results for the ADPKD cohort of the PHOENIX trial. Results from the Phase 2 portion of CARDINAL demonstrated a significant improvement in estimated eGFR after 48 weeks of treatment with Bardoxolone, and a significant improvement in retained eGFR benefit at week 52 following four weeks of drug withdrawal.
To our knowledge, Bardoxolone methyl is the first therapy to produce a retained eGFR benefit that is above baseline in a long-term CKD trial, and we believe that the retained benefit provides evidence that increases in estimated eGFR observed with bardoxolone therapy may prevent or delay kidney failure in patients with Alport Syndrome.
Turning to the PKD cohort of PHOENIX, we enrolled 31 patients and observed a statistically significant mean increase from baseline an eGFR of 9.3 mL/min at Week 12. Historic eGFR data from 29 of these patients demonstrated that their kidney function was declining at an average annual rate of 4.8 mL/min for three years prior to study entry. Based on these results and the historic correlation between eGFR increases at week 12 and retained eGFR benefit at one year, we announced plans to initiate a pivotal study for bardoxolone in PKD, which will begin in 2019.
In September, we announced positive final results for IgA nephropathy in type 1 diabetic CKD cohorts of PHOENIX, which demonstrated that Bardoxolone significantly increased eGFR at week 12 in both cohorts. We enrolled 26 patients in the IgA nephropathy cohort, and observed a statistically significant, mean increase from baseline in eGFR of 8.0 mL/min at Week 12. We enrolled 28 patients in the type 1 diabetic CKD cohort and observed a statistically significant, mean increase from baseline in eGFR of 5.5 mL/min at Week 12. Historically 25% to 40% of the arm treatment eGFR benefit is retained at one year. Based on the magnitude of response we observed in these cohorts and the rate of eGFR loss that typically occurs in these patients, we intend to pursue both indications commercially.
Collectively, these studies demonstrated that Bardoxolone improved kidney function across multiple forms of CKD in patients whose kidney function was declining while on standard of care, and suggest that Bardoxolone has the potential to delay or prevent dialysis in multiple forms of chronic kidney disease.
Regarding the ongoing Phase 3 CARDINAL study of Bardoxolone in patients with Alport Syndrome, I'm pleased to announce that this trial is fully enrolled and we are confirming our guidance to top line data from the study will be available in the second half of next year.
Turning to our second registrational program, we are studying omav, our second generation Nrf2 activator in the ongoing pivotal part 2 of the MOXIe trial in patients with Friedreich’s Ataxia. You may recall at the optimal dose in the dose ranging part of MOXIe, we observed statistically significant improvement in the mFARS scores of 3.8 points versus baseline at week 12, and a placebo corrected improvement in mFARS of 2.3 points, which approached significance with a p value of 0.6.
The primary endpoint for the pivotal part 2 of MOXIe is a placebo corrected improvement in mFARS of 1.2 points, roughly half of what we observed at the optimal dose in part 1. Based on the results of part 1 and the design of part 2 of MOXIe, we are optimistic that omav can become the first approved and effective therapy for patients with FA. I'm also pleased to announce that the MOXIe trial is fully enrolled and we are confirming our guidance that top line data from this study will be available in the second half of next year.
Finally the CATALYST study of Bardoxolone in connective tissue disease associated pulmonary arterial hypertension is also proceeding as planned, and we continue to expect top line data from this 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, I will now turn the call over to Jason to provide a summary of the financial results for the quarter.
Thanks, Warren and good morning everyone.
As Warren noted, this morning, we reported the financial results for the third quarter of 2018. Net loss for the quarter was $30.8 million or $1.07 per share, compared to a net loss of $12.3 million, or $0.50 per share for the same period last year. The increased net loss for the three-month period compared to prior year is driven both by an increase in expenses and decrease in revenue.
Regarding expenses, we incurred total expenses of $34.7 million for the quarter ended September 30, 2018 compared to $24.6 million for the same period last year. The higher expenses are primarily driven by an increase in R&D expenses due to clinical and manufacturing activities as we have continued development of our product pipeline, and an increase in personnel expenses to support these expanded development activities.
The decrease in revenues was related to our license and collaboration agreements. As you probably know, much of our revenue has been related to recognition of deferred revenue from upfront payments from license and collaboration agreements entered into during 2009, 2010 and 2011. The upfront payments amounts from these agreements were recorded in deferred revenue when received, and then recognized as revenue during our performance obligation period.
In 2017, we finished recognizing revenue from an upfront payment received under a 2010 license agreement. So it is no longer included in our revenue in 2018. In addition, during the first quarter of 2018 we implemented Topic 606 on revenue recognition, which substantially changed the way that milestone payments are recognized and required some amount of the revenue to be apportioned to the past. In the third quarter we determined that we had overallocated revenue related to a milestone from KHK to the past and we have [ingested] the revenue and deferred revenue accounts reducing our third quarter revenue.
This of course does not impact the payment of the KHK milestone, which was made and reflected in our cash balances in the third quarter. On another note, in this quarter we have added a non-GAAP measurement, cash-based operating expenses, which we define as total expenses excluding stock-based compensation expense and amortization and depreciation expense. Our cash-based operating expenses were $31.9 million and $22.9 million for the three months ended September 30, 2018 and 2017 respectively.
A reconciliation of this non-GAAP measure to total expenses is included in the press release issued this morning, and can be found on the company's website at www.reatapharma.com under investors and news, subheading news and events, subheading press releases. We expect our cash-based operating expenses will continue to increase as we advance our product candidates into additional development, continue to grow the company and prepare for commercialization.
At September 30, 2018, we had approximately $375 million in cash and cash equivalents, and we believe our existing cash and cash equivalents will be sufficient to enable us to fund our operating expenses and capital expenditure requirements well past the data on our three registrational trials, and into 2021.
With that I will turn the call back over to Warren.
Thanks Jason. 2018 has been a transformative year for the company. We reported Phase 2 data on our lead program Bardoxolone in Alport Syndrome that helped sharpen our understanding of how patients in both the active treatment and placebo arms of the ongoing pivotal trial might behave.
We initiated, completed and reported positive data from three additional proof of concept Phase 2 studies in chronic kidney disease, and began preparations to launch a pivotal trial in ADPKD. Furthermore in 2018, we completed enrollment in two parallel, independent pivotal clinical trials in two distinct rare diseases, which represents a major achievement for our company. Over the course of the next 18 months we expect to generate significant news flow, including the full results from the FSGS cohort of PHOENIX in the first half of 2019, Phase 1 data for RTA 1701, a potent and selective modulator of RORγt 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 growing portfolio of ongoing pivotal programs we are 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 again soon on our progress.
That concludes our prepared remarks, and so I will now turn the call over to the operator for questions.
Thank you. [Operator Instructions] And our first question comes from Yigal Nochomovitz with Citigroup. You may proceed.
Hi, thanks for taking the question. Warren and Colin, on the Phase 2 for ADPKD, is it the plan as with Alport to continue that study out to the 48-week time point, and then check for retained benefit at 52 weeks or is that study going to stop as you move to the Phase 3?
Hi Yigal. It is a good question. But the PHOENIX protocol is different than the CARDINAL protocol. The PHOENIX protocol as you know contains four independent sets of patients, and the treatment duration is only 12 weeks, and so there is no retained benefit analysis, no extended [integration of treatment]. And as we mentioned with PKD, we are planning to launch a pivotal trial in the upcoming year in 2019, and so we will clarify the specific plans once we can, but we would anticipate that we would have obviously a longer duration study and assess retained benefit in that trial.
Okay. So the Phase 3 design for ADPKD is beyond longer duration at this point – the details are pending?
Yes, we would anticipate that any registrational trial would be longer than 12 weeks. We will provide more granular details when we can.
Okay, and then given you have completed the enrolment in the Phase 3 part of the CARDINAL study, can you comment at all on how similar the baseline characteristics are for the 157 that have been enrolled relative to the Phase 2 part of CARDINAL?
So, I will just say that the baseline characteristics are within our expectations and obviously consistent with the eligibility criteria. We will plan to have a deep dive on those in an upcoming medical meeting.
Okay. And where you are thinking with respect to potential for Phase 3s in some of the other PHOENIX cohorts like IgA and type 1 diabetic CKD, is that still in the cards or is the focus now on Alport and ADPKD?
It's definitely in the cards. We have indicated that we plan to pursue the additional indications, IgA nephropathy and type 1 diabetic CKD as commercial indications. Obviously we have three registrational trials underway right now. We are adding a fourth with PKD that will start next year. And we are now internally planning as to when best to launch additional pivotal trials.
Okay. Thank you.
And our next question comes from Adam Walsh with Stifel. You may proceed.
Hi, good morning. I just have a quick one for Collin, Collin at ASN results from a couple of the patient populations in the PHOENIX trials showed a few cases of elevated liver enzymes as part of the AE profile, could you maybe contextualize those findings for us, maybe remind us what was shown and then what the liver safety history has been across the entire Bardoxolone clinical trial experience? Thank you.
Sure. No problem Adam. And so occasionally we see elevations of ALT and AST, notably those transaminases are regulated by the target of Bardoxolone, which is Nrf2, and so it is a pharmacodynamic effect. We have seen it in prior trials. It follows a very distinct pattern. Clinically the elevations typically occur fairly quickly after initiation of treatment. In the 2000 plus patients we have treated with Bardoxolone there has never been a case of primary liver toxicity, never been a case of Hy's Law, notably in the BEACON trial.
There were half as many hepatobiliary serious adverse events in the Bardoxolone group relative to placebo, and total bilirubin was actually reduced. And as you probably know total bilirubin is the marker of liver function, and so we believe we actually see improved liver function. We have investigated the pharmacology of transaminases in-depth, and I think we have had posters at medical meetings years ago. I think most importantly we have demonstrated in cell culture that upon administration of Bardoxolone there is increased production of transaminases. And so in models of genetic manipulation of Nrf2, if you activate Nrf2, you increase production of transaminases, if you genetically knockout Nrf2, you reduce production of transaminases. And so the changes that we observed in our clinical trials actually have nothing to do we think with liver toxicity, and it is simply a pharmacodynamic effect.
We do monitor them, of course, just to make sure that if there ever was going to be a potential case of liver toxicity, we don't miss it. But what we have seen in our clinical trials is consistent with the regulated effect and once again there is actually zero evidence of liver toxicity in any of our clinical trials.
Thanks for all the color.
And our next question comes from Maury Raycroft with Jefferies. You may proceed.
Hi, good morning everyone, and thanks for taking my questions. First question, just wondering if you can provide perspective coming out of [ASN] on KOL sentiment, particularly in respect to proteinuria or eGFR and then how this relates to different levels of Proteinuria and eGFR rates decline that you see across the different cohorts in Phoenix.
Sure, Maury. So, I think that the KOL's have been very pleased with the data that we produced and so we now have data across many different forms of chronic kidney disease caused by obviously completely different etiologies that show a very consistent pattern.
At ASN, we have four different clinical presentations, there is a lot of traffic to the presentations; people are now understanding rapid profile is consistent with what we've seen before. In diabetic CKD and it's supported by over 40 peer reviewed manuscripts that have elucidated the pharmacology in various animal models.
As far as some of your specific questions about Proteinuria, and then eGFR, there has been a question if the increase in GFR is due to something called hyperfiltration. Which importantly is a very specific effect of increased pressure in the kidney that may transiently increase GFR. That it ultimately within the period of just a few months cause injury and loss of GFR.
We've shown very carefully in animal models that that does not occur. The drug restores surface area that's constricted in the cellular inflammation basically restoring increasing GFR to a non-damaging pattern. We’re now shown in several trials, including Alport syndrome and CARDINAL and diabetic CKD in the BEAM and BEACON trials.
That the effect is durable for at least one year. And so, and the magnitude is quite large. This is very distinct once again from a pattern of hyperfiltration. And importantly, we've shown retained benefit now in three different trials, including the CARDINAL phase II trial. That rules out harm to the kidney and demonstrates disease modifying activity.
And so, I think those data have been very helpful for the nephrology community to see that the mechanism is not damaging. As far as Proteinuria is concerned, that's often cited as potentially evidence that there is hyperfiltration. But our pattern is once again distinct from that.
I think if you step back and think about the kidney and different forms of CKD, if there's damage to the filtration barrier because of the disease process, and there's basically an increased sieving of protein and the damage is present when the patient enters our clinical trial.
If you increase GFR, you'll simply increase filtration or sieving of protein. And so, we do see that in our output syndrome trial and we did see that in our diabetic, type II diabetic CKD trials. Notably, the increase is accounted for by the change in GFR.
And then after GFRs maximal, Proteinuria is maximal, and that actually trends down. And that was highlighted in our CARINAL one year phase II data at ASN. Some additional data that we released demonstrates that not only there's overall Proteinuria reduced over time and actually at the end of one year it was not significantly different from baseline.
Once the drug is withdrawn and washed out, what we demonstrate, retain benefit on eGFR, Proteinuria is actually no different and base line. And new data that we released, ASN demonstrate that in the patients who have the highest levels of Proteinuria in our phase II CARDINAL trial, those were Macroalbuminuria.
And upon entry, who are on average had about gram level Proteinuria. So, pretty high. Those patients also demonstrated an initial increase. There was a kind of fore body change in GFR. But the reduction it was observed, it was actually large on those patients.
While the patients were on drug every 48, it was actually slightly below base line. And so, not up but actually down numerically. And when patients came off drug and washed out and once again would suggest to retained benefit on eGFR. There was a 28% reduction in Proteinuria in that sub-side.
So, that's actually very meaningful. And so, all-in-all I think our profile is now something very distinct. We observed the same profile across many different forms of CKD. This profile is very distinct from what you would anticipate from pressure-mediated hyperfiltration.
And there's actually zero evidence in our clinical data or in the pre-clinical data that our drug has that specific effect. It's very novel, it restores surface area and the effects and GFR we've seen have been durable for the longest ratio tested.
Okay, and that's very helpful. And just kind of a take away from that. So, as far as Proteinuria goes, you're really not limited to specific patient type space on either high Proteinuria or low Proteinuria base line.
You're correct. I think that's one of our distinction from our program. And so, and I guess to add a little bit more color on the Proteinuria discussion. And so, while in output syndrome and type II diabetic CKD where patients had a significant damage to the filtration barrier and we see this initial increase.
In the other cohorts, in the other patients we studied, we do not see an increase in Proteinuria. And so, in PKD that's primarily disease of the tubules or cysts formed. Those patients have normal Proteinuria point of the entry and bardoxolone did not cause an increase in Proteinuria in those patients.
Similarly, in the IgA nephropathy patients, that there was no increase in Proteinuria. In the type I diabetic sickly patients, there was no increase in Proteinuria. And so, I think there's a very once again distinct effect on Proteinuria that just pin it upon the baseline status.
And since Proteinuria is really a surrogate of a surrogate, and so FDAs mind obviously ideally they would prefer companies produce, how come data's showing a different than, can you transplant dialysis events, that's obviously not feasible as they acknowledge in rare forms of CKD and so eGFR is now acceptable as a surrogate end point.
Proteinuria is simply a marker of potential entry in patients and that's a surrogate of eGFR change which is a surrogate of outcomes. And since our drive and has a primary effect on eGFR, that is the important endpoint for us in all of our trials. We don’t have to limit the trials to patients with high levels of Proteinuria.
All the other trials that are ongoing in either IgA nephropathy or FSGS, have to select for patients with high levels of Proteinuria because those interventions reduce Proteinuria and they're trying to determine if that reduction can then associate with an improvement in eGFR versus placebo.
For reference in our IgA nephropathy trial, in PHOENIX of the 20 some patients who we enrolled, not only a single patient had gram level Proteinuria and that's often the threshold that's used for inclusion trials. And so, I think in an unbiased manner when we simply enroll patients, you'd see that most patients actually don’t have extremely high levels of Proteinuria if they're being adequately cared for on standard of care.
I think that's one something that's not actually well appreciated across the nephrology community and we kind of see it in the open-label trials of, they've done an excellent job of treating patients with standard or care, ACE inhibitors and angiotensin receptor.
And those have significantly reduced protein levels, yet patients are still chronically declining. And we see patients as Colin mentioned, the vast majority on our trials have less than gram level Proteinuria but have low GFRs and are headed to an ESRD event.
Got it, very helpful. Just one more quick question on Friedreich's ataxia. Just wondering if you can talk about just generally the patients in part II and how they compare to part I. and I know you are aiming for specific proportion of patients with the foot deformity.
And if you could just comment on that as well.
So, and so I think very similar answer to the question about the CARDINAL phase III population. So, we'll disclose details with the base line characteristics at a future medical meeting. As with all of our trials, we take great care to make sure that we do enroll patients who we think would be appropriate.
And so, we engineered enzyme requirements and caps to kind of insured that the patient population would be similar to those that we previously studied in part I of the trial. So, for instance, patients with a foot deformity or pes cavus, there was a cap of 20% of patients and so that cap was not exceeded.
Got it, okay. Thank you, very much.
And our next question comes from Joseph Schwartz with Leerink Partners. You may proceed.
Hi, good morning. Thanks for taking the question. This is Dan, I'm dialing in for Joe. So, I know it's early and you didn’t really provide any specifics. So, I just want to see if I can attempt to gain a little more granularity on particularly your Bard plans in the various renal CKD indication.
So, with regards to ADPKD with the pivotal trial initiating in 2019. Just wondering based on the tolvaptan precedent and what you'd seen in CARDINAL, is it safe to assume that you're going to go all the way out to 48-weeks plus four weeks or something shorter than that.
And the reason I'm asking that specific question is sort of related to the other the PHOENIX wherein your 12 units have shown benefit by in your previous experience. 12 weeks eGFR have shown some pretty good predictability how to one year's out.
So, how are you thinking about for your PHOENIX cohorts in terms of trial duration? Do you necessarily need the 48-week plus four week retain benefit or can you go someplace shorter like 36-weeks like some of the other guys in the field I'm pursuing. Thanks.
Yes. So, you are correct and that the eGFR change at 12-weeks has been predictable of the change at one year on-and-off drug. I think importantly, we believe that's efficient to know the drug is active in a various type of CKD regulators and have already determined what the relevant duration is for approval.
And despite a few trials having accelerated pivotal endpoints at 36-weeks. The full approval requires at least two years of treatment. And so, if you look at the cost any of the recent CKD trial, either ours and Alport syndrome or others in IgA or FSGS and full approval will be determined by in eGFR based endpoint at a minimum two years.
And so, from our perspective, we would anticipate that we would receive kind of a similar guidance to what we would have with be before. And so, two year trial with one year of treatment analysis potentially for accelerated approval, a one year and then a two years of full approval. So, that’s kind of our base case plan.
I would just add to that we now have off treatment data at one year in two diseases and in three clinical trials. We don’t have off treatment data at week-36. And so, just from a predictability standpoint and study design standpoint, we would not want to deviate from that even if that was possible to get it earlier.
We would want to. We know the 12-week data predicts as you mentioned on treatment and off treatment at one year. And so, that's the way we would propose the study.
Great. So, just a follow-up. With regards to the PHOENIX cohort. Aside from ADPKD plans, you haven’t really laid out a timeline for the IgA or type I diabetic CKD. Are you basically waiting on the FSGS update in the first half '19 before you make your next plans or do you already have an end-of-phase II meeting scheduled for those other indications to discuss? Thanks.
And so, we're not waiting on the FSGS data. We were simply trying to appropriately triage our opportunities based upon the current personnel and counter resources. And so, so mentioned we have three ongoing pivotal trials. So, the CARDINAL trial and Alport syndrome, the MOXIe trial and Friedreich's ataxia and the CATALYST trial.
In CTD-PAH, we're adding a fourth pivotal trial with ADPKD in 2018. And they will need to layer on subsequent pivotal trails as appropriate. Obviously, we need to make sure that we execute and hopefully bring home positive data from our phase III trial for the underway.
As Warren mentioned, we will have data from the first two and the second half of next year and so it's imperative that we bring those trials successfully. And then obviously proceed as rapidly and efficiently as possible, to NDA submission in commercial March and those two drugs.
So, that's our top priority. And then these additional pivotal trials that will be a secondary, not priority.
It's just a question of sequencing.
Right. Thanks for taking our questions.
[Operator Instructions] And our next question comes from Charles Duncan with Cantor Fitzgerald. You may begin.
Hi, guys. First of all, congrats on the progress in the year; it's been a good one. And thanks for taking our questions. Most of my clinical questions have been asked but I wanted to perhaps press the fast forward button and something you just alluded to and that is commercialization and go-to market plan.
It sounds like in about a year we're going to be looking at pivotal data, not only in Alport but also perhaps even Friedreich's ataxia. It seems like those are really two divergent prescriber basis. So, surely given some thought and I'd like to hear any color you have on the go-to market strategy.
And then I wanted to ask a follow-up with regard to any recent interactions with old partner AbbVie.
Sure. And Charles, I'll take that. Yes, we're actively preparing for the launch of potentially both products and their initial CKD launch in Alport syndrome and also a virtual parallel launch in Friedreich's ataxia on the assumption that both studies could come out positively.
They're both conservatably designed and have a very good probability of success. They're obviously in very different therapeutic areas but both of them have similar characteristics and that they're rare orphan diseases currently with no approved therapy.
Our endpoints are designed to show very meaningful clinical benefit to these patients. And in the Alports case, the retained benefit we believe would support that the drug is having a disease modifying effect in the disease. And in Friedreich's ataxia, there is data showing that the far score correlates very highly with activities of daily living and therefore would be a very meaningful clinical measure of improvement in those patients.
So, we're kind of laying the ground work today with the clinical trials to have data that would support potentially claims of disease modifying therapy in rare orphaned disease with no approved therapy.
We've also, I think you know have been building our commercial function over last year and this year. Dawn Bir, who played a key role in launching IMBRUVICA, joined our team as Chief Commercial Officer. Last year, she's being building her team during the year. We've also significantly expanded particularly in the CKD space, on medical affairs functions.
And you see that reflected in expense increase that we've had year-over-year. A lot of that is related to manufacturing scale, building out these additional functions and preparing for the commercial launch of the product.
We also recall that with respect to bardoxolone and CKD, we've retained a 100% of the commercial rights and economics in the United States. We have a very active partner in Japan, Southeast Asia with Kyowa Hakko Kirin and of course they're actively preparing for the launch there.
And AbbVie, has a onetime option to elect in to commercialize those indications and the rest of world territories outside of the United States and outside of the Kirin territories. And they will be presented with an election option when we have the phase III data. And I think one of three things will happen along the way which is they will elect in and launch the product commercially in those territories.
They'll return the rights to us in which case we would either plan to launch in those territories or would have to have a substitute partner in those territories.
It's helpful. A reminder or an -- it seems like given at least to impose Alports and other to be diseases as well as Friedreich's ataxia. The patient population fairly well organized through efficacy community and differentiated clinical profile assumed out of bardoxolone and omaveloxolone. I guess I'm wondering if you think that this could be a relatively reasonable size, commercial effort in terms of a number of people that could effectively marketed the drug.
Yes. I mean, if you take Friedreich's ataxia, I think we've commented before but there is an extremely affective patient organization FARA, very active in the disease. They're -- this has been a disease with little hope. And I think we've been very engaged with them. There is an existing patient registry, they've done a fabulous job collecting long-term data.
But just to say there is a very active patient group and a huge on [med need]. It is an absolutely terrible disease. So, the kind of topline analysis of that is, yes we would be launching a drug with demonstrated efficacy with a robust clinical trial into a rare deadly disease with no approved therapy and currently have terrible outcomes.
And similar for Alport syndrome, it's one of the most severe forms of CKD. There is no therapy specifically approved for it, although ACE inhibitors and arms are used off label. But you can see from the data we presented in the phase II, there were substantial average GFR declines in those populations that were a lot higher than we observed in diabetic CKD earlier.
And so, those patients are at high risk of progressing to kidney failure and the consequences of that. And so, again a rare deadly disease with no approved therapy. And you can try your own conclusions about pricing and penetration but we think it’s a very good, both of them are very good commercial opportunities for us.
It should be an interesting year in 2019. Thanks for the added color, Warren.
You bet! Thanks for the questions.
And we have a follow-up question from Yigal Nochomovitz with Citigroup. You may proceed.
For taking the follow-up. Just a prior question the conversation a little bit more on the AbbVie question. Could you just comment as to the potential advantages or disadvantages of the two scenarios the outlined one? And is there internal preference to whether you'd have prefer AbbVie to elect in or potentially have the opportunity to re-partner yourself? Thanks.
I don’t think we could really say much more about it. I think AbbVie would be an excellent commercial partner. If they're elected into the project, I'm sure they would do an excellent job of commercializing it in the offshore territories.
At the same time, the other option of having the rights return to us and giving us the option to either launch the product or we partner and would also be obviously extremely attractive to us. So, from our standpoint I think we our primary goal is to make sure that the product gets launched on a timely basis and effectively in those territories.
And there are a number of good options.
And can you just remind us and everyone listening, what the economics are if they decide to upend, isn’t there some [monitory some] they have to pay to make them to contribute to the development?
Yes. So, first-of-all, both, all the territories just to reiterate, we've retained a 100% of economics in the U.S. in all of the territories offshore and just including the Kirin territories and the AbbVie potential territories are burdened by double digit royalties to us.
In addition to that, AbbVie would have, if they're elected in, would have to reimburse us for a --
It's a 100%.
To a 100% of our development cost to-date. And then would be cost sharing after that.
Have you disclosed what that amount is approximately?
No, we haven’t.
Okay, all right. Thank you very much for taking the follow-up.
You bet.
Ladies and gentlemen, this now concludes our Q&A question of today's call. I would now like to turn the call back over to Vinny Jindal for any closing remarks.
Thanks, Demetrius. Thanks everyone, for joining us this morning. We're looking forward to updating you in our progress again soon. Take care.
Ladies and gentlemen, thank you for attending today's conference. This does conclude the program. And you may all disconnect. Everyone, have a wonderful day!