Image source: The Motley Fool.
Reata Pharmaceuticals, Inc. (RETA)
Q4Â 2019 Earnings Call
Feb 19, 2020, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Ladies and gentlemen, thank you for standing by, and welcome to Reata Fourth Quarter and Full Year 2019 Financial Results and Update on Development Programs Conference Call. [Operator Instructions] An audio recording of today's webcast will be available shortly after the call today on Reata's website at reatapharma.com in the Investors section.
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, February 19, 2020, and may no longer be accurate at the time of any webcast replay or transcript rereading. Following the prepared remarks, we will open the call up for questions. We ask that you please limit yourself to one question and one follow-up, so that we can accommodate as many questions as possible.
At this time, I would like to turn the call over to Vinny Jindal, Vice President of Strategy. Thank you. Please go ahead.
Vinny Jindal -- Vice President of Strategy
Thank you. Good afternoon, and welcome to Reata management's call to discuss fourth quarter and full year 2019 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 Investors 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, Manmeet Soni. I'll now turn the call over to Warren.
Warren Huff -- Founding Chief Executive Officer and President
Thanks, Vinny. Good afternoon, everyone, and thank you for joining us. I'd like to begin our call today by reviewing the progress we made in 2019.
Starting with our development pipeline, last year, we announced positive results from pivotal clinical studies in CKD and neurology. In CKD, we reported positive top-line one-year results from the pivotal CARDINAL Phase 3 study of bardoxolone in patients with Alport syndrome. In neurology, we reported positive top-line results from the pivotal MOXIe study of omaveloxolone in patients with Friedreich's ataxia. There are no approved therapies for patients with Alport syndrome, or FA, and we're the first to produce positive clinical data for a novel interventional therapy in each disease. Additionally, we expanded our development program for bardoxolone for rare forms of CKD with the launch of FALCON, which is studying bardoxolone in patients with autosomal dominant polycystic kidney disease or ADPKD.
We also completed enrollment in CATALYST, a pivotal study of bardoxolone in a severe form of pulmonary disease called connective tissue disease associated pulmonary arterial hypertension or CTD-PAH.
As a result of a recent agreement with AbbVie, we now own worldwide commercial and development rights for all of our pipeline assets, except for certain Asian territories licensed to Kyowa Kirin for bardoxolone. We maintain robust IP protection for these assets and have built an experienced commercial leadership team capable of launching bardoxolone and omaveloxolone globally.
Beyond our lead indications, Reata has numerous development opportunities that fit within our strategic priorities and that we intend to pursue. In CKD, as we've said previously, we plan to commercially pursue the diseases in which we observe strong proof of concept data in the Phase 2 PHOENIX study, IgA nephropathy, FSGS and CKD caused by \type 1 diabetes. We also plan to launch studies for omaveloxolone in neurological conditions, which like FA, are driven by neural inflammation, oxidative stress, and impaired Nrf2 activity. We generated preclinical proof of concept data with our Nrf2 activators in a number of neurological diseases that fit this profile.
Our earlier-stage pipeline includes two wholly owned molecules, RTA 901 and RTA 1701, which have completed Phase 3 studies, which have both orphan and broad market applications. We expect to continue developing RTA 901, the lead product candidate from our Hsp90 modulator program for the treatment of neurologic diseases such as diabetic neuropathy.
RTA 1701 is a potent and selective inhibitor of RORgamma t, a transcription factor involved in the pathogenesis of many autoimmune and inflammatory diseases. We're excited about the prospects for both programs.
Because of the results we've observed with our Nrf2 activators across multiple organ systems and diseases, I'd like to briefly touch on the pharmacology of Nrf2 activation, and why we believe it can be applied to a broad set of diseases. This is important now that we acquired worldwide development rights to the program. Activation of the transcription factor Nrf2 restores mitochondrial function, inhibits pro-inflammatory signaling and reduces fibrosis. These are three hallmarks of many diseases that occur in numerous organs and tissue types.
In addition to activity in CKD and neurologic disease, our Nrf2 activators have been studied and demonstrated activity in models of liver, autoimmune, cardiovascular and metabolic diseases as well as diseases of the eye. Therefore, we believe the Nrf2 activators are platform technology with significant expansion opportunities.
Of course, we're developing bardoxolone for the treatment of patients with CKD caused by Alport syndrome, ADPKD and other rare forms of CKD, that in the aggregate, affect more than 700,000 patients in the United States. Few or no effective therapies are currently approved for treatment of these diseases. And we believe bardoxolone can become an important therapeutic option for many of these patients.
The lead indication in our CKD franchise is Alport syndrome, which is a rare hereditary and severe form of CKD, affecting approximately 30,000 patients to 60,000 patients in the United States. The ongoing Phase 3 portion of CARDINAL is the largest global interventional study ever conducted in Alport syndrome. Secondary endpoint for CARDINAL is the off-treatment analysis of week 52. And in this analysis, patients treated with bardoxolone demonstrated a statistically significant placebo corrected 5.14 milliliter per minute improvement compared to placebo with a p-value of 0.0012.
Based on these positive results and, of course, subject to discussions with regulatory authorities, we plan to proceed with the submission of regulatory filings this year for marketing approval in the United States. We'll not be commenting in the call or Q&A on our ongoing interactions with the regulatory agencies.
Our lead indication in neurology is Friedreich's ataxia, an ultra-rare orphan disease that affects approximately 22,000 patients worldwide and approximately 5,000 patients in the United States. The pivotal MOXIe study of Omav in FA was the largest global interventional study ever conducted in FA, and successfully met its primary endpoint of change in the modified Friedreich's ataxia rating scale relative to placebo after 48 weeks of treatment. Patients treated with Omav demonstrated a statistically significant placebo contracted 2.4 point improvement in the mFARS compared to placebo after 48 weeks of treatment with the p-value of 0.014. Based on these positive results, and of course, subject to discussions with regulatory authorities, we plan to proceed with the submission of regulatory filings this year for marketing approval in the United States. As with bardoxolone, we will not be commenting in the call or Q&A on our ongoing interactions with the regulatory agencies.
I'd like to make one additional point about the MOXIe results. We believe that the results are also important because they provide proof of concept that improvements in mitochondrial function from Omav treatment may provide a therapeutic benefit in several other neurologic diseases. The processes of neural inflammation and impaired cellular energy production that Nrf2 activation can resolve occur in other regions of the brain, causing other rare and debilitating neurologic diseases. We've observed promising preclinical results with Omav and related molecules in models of Parkinson's disease, dementia, epilepsy, Huntington's disease, ALS and Alzheimer's disease. We plan to develop Omav clinically for one or more of these diseases.
In 2019, we completed enrollment in the pivotal CATALYST study of bardoxolone in connective tissue disease associated pulmonary arterial hypertension or CTD-PAH. CATALYST is an international randomized double-blind, placebo-controlled trial examining the safety, tolerability and efficacy of bardoxolone in patients with CTD-PAH when added to standard of care vasodilator therapy. The primary endpoint of the study is the change from baseline in six-minute walk distance relative to placebo week 24.
Based on the results observed in our Phase 2 LARIAT study in the design of the CATALYST trial, we believe bardoxolone has the potential to become the first therapy approved, specifically for patients with CTD-PAH. We expect to release top-line results from the study midyear.
Our goal is to make bardoxolone and Omav available for patients as soon as possible. And accordingly, I want to provide a high level summary of our pre-launch efforts. Subject, of course, to approval from the FDA and other regulatory agencies, we're actively preparing for the commercial launch of bardoxolone for patients with Alport syndrome and of Omav for patients with FA. We have a seasoned commercial leadership team that previously played key commercial roles in company's success of [Phonetic] launching drugs for rare and orphan diseases. In addition, our CMC team is in place and we're building redundancy in suppliers to support the supply needs for ourselves and our collaborators.
I'll now turn the call over to Manmeet to provide a summary of our financials for the fourth quarter and full year 2019.
Manmeet S. Soni -- Chief Financial Officer and Executive Vice President
Thanks, Warren, and good afternoon, everyone. Please refer to our press release issued earlier today for a summary of our financial results for the fourth quarter and full year of 2019.
Let me start with our cash balance. We maintained a solid balance sheet ending 2019 with approximately $664 million in cash and cash equivalents. This includes cash proceeds coming from our financing completed in November 2019, amounting to approximately $492 million in net proceeds.
Our GAAP net loss for the quarter -- fourth quarter of 2019 was $186.9 million or $5.91 per share on both basic and diluted basis as compared to a net loss of $25.6 million or $0.86 per share on both basic and diluted basis for 2018.
Our GAAP net loss for the year ended December 31, 2019, was $290.2 million or $9.54 per share on both basic and diluted basis, as compared to a net loss of $80.5 million or $2.91 per share on both basic and diluted basis for the prior year. The increase in GAAP net loss for the quarter and the year was primarily due to an expense of $124.4 million, recorded as reacquired license rights in the P&L, resulting from our agreement entered in October 2019 with AbbVie to reacquire the license rights. This expense is calculated at the net present value of $330 million payments related to reacquisition of license rights offset by a deferred revenue balance remaining under the AbbVie collaboration agreement.
In addition, our R&D expenses increased due to higher personnel and equity compensation expenses, with increase in headcounts and manufacturing expenses associated with our late-stage programs as we continue to expand and advance our development pipeline.
Our G&A expenses increases were driven by an increase in personnel and rent expenses to support growth in our development activities, in addition to commercial readiness activities.
Moving to revenues, our collaboration revenues were $2.7 million during the fourth quarter of 2019 as compared to $8.5 million in the fourth quarter of 2018. This reduction in collaboration revenue was related to accounting of reacquisition of the license rights from AbbVie, which resulted in recognition of deferred revenue related to AbbVie as an offset to expenses.
Moving to non-GAAP measures, which excludes stock-based compensation and reacquired license rights expenses. Our non-GAAP R&D expenses were $36.7 million for the fourth quarter of 2019 as compared to $24.3 million for the same period of the year prior. Our non-GAAP G&A expenses were $13.4 million for the fourth quarter of 2019 as compared to $6.2 million for the same period of the year prior.
To summarize, our non-GAAP operating expenses were $50.4 million during the fourth quarter of 2019 with four pivotal development programs in pipeline and several early stage preclinical activities. This highlights our financial discipline and efficient capital allocation to manage our cash funds. We expect our current cash balance of $664 million to fund our operations through the end of 2021.
With that, I will turn the call back over the Warren.
Warren Huff -- Founding Chief Executive Officer and President
Thanks, Manmeet. As our presentation today indicates, we're making progress on our programs in Alport syndrome, ADPKD, FA and CTD-PAH, and have significant expansion opportunities for bardoxolone in CKD and for Omav in neurology. We're also excited to move forward with our promising early stage programs RTA 901 and RTA 1701.
With a strong balance sheet and a seasoned and growing commercial team, we're well positioned to commercialize our 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'd like to thank everyone who dialed in. I'll now turn the call over to the operator for questions.
Questions and Answers:
Operator
Thank you. [Operator Instructions] Our first question comes from Yigal Nochomovitz with Citi. Your line is now open.
Samantha Semenkow -- Citigroup -- Analyst
Hi, this is Samantha on for Yigal. Thanks very much for taking our questions. We appreciate the update in the detailed financial analysis. First, I guess, I just curious on how the enrollment cadence for ADPKD has been progressing. And when we can expect a top-line data readout for this program?
Warren Huff -- Founding Chief Executive Officer and President
Yeah. We announced last year that we initiate enrollment in the FALCON trial of ADPKD and we have not yet provided guidance on completion of enrollment and when will have data.
Samantha Semenkow -- Citigroup -- Analyst
Okay. Understood. And then turning to the Phase 3 CATALYST study, the readout expected this summer, mid-2020. What are the risks associated with this program? And what are the reasons to believe it should work?
Warren Huff -- Founding Chief Executive Officer and President
So, we have ample evidence that the drug mechanistically could affect pathways that are relevant to CTD-PAH. As you know, bardoxolone targets bioenergetic and inflammatory components of PAH. These patients experience mitochondrial dysfunction, increased NF-kappaB activity and related inflammatory pathways involved in ROS-mediated signaling, cellular proliferation, and fibrosis. Through bardoxolone's effects on induction of Nrf2 and suppression of NF-kappaB, it has the potential to inhibit inflammatory and progress signaling. This was signaling that's associated with downstream, remodeling, fibrosis. And these pathways are not directly affected by available therapies. And so the trial obviously is under way. And we think it's well powered based upon the Phase 2 data.
Samantha Semenkow -- Citigroup -- Analyst
Thanks very much for taking the question.
Warren Huff -- Founding Chief Executive Officer and President
You are welcome.
Operator
Thank you. Our next question comes from Maury Raycroft with Jefferies. Your line is now open.
Maury Raycroft -- Jefferies LLC -- Analyst
Hi everyone. Thanks for taking my question. So I guess you can't comment on ongoing interactions with the regulatory agencies, but can you comment on timing for when you could file for Bard and Omav, and then whether you'll provide an update to the Street post pre-NDA meetings?
Manmeet S. Soni -- Chief Financial Officer and Executive Vice President
Sure, Maury. So as Warren noted in his prepared remarks, we're planning to file the NDAs in the US for both bardoxolone in Alport syndrome and Omav in FA this year. We will not comment on ongoing regulatory actions other than that.
Maury Raycroft -- Jefferies LLC -- Analyst
Okay. And then also as you approach the filing for bardoxolone in Alport syndrome, do you have a better sense of how much two-year data or how many patients you will have two-year [Phonetic] data on -- for when you file?
Warren Huff -- Founding Chief Executive Officer and President
We're not going to comment on the two-year data.
Maury Raycroft -- Jefferies LLC -- Analyst
Okay. Thanks for taking my questions.
Warren Huff -- Founding Chief Executive Officer and President
Okay.
Operator
Thank you. Our next question comes from Adam Walsh with Stifel. Your line is now open.
Adam Walsh -- Stifel Financial Corp. -- Analyst
Good morning guys. Thanks for taking my questions. My first one is just on resource allocation. You've obviously had good data in the PHOENIX trial with IgA nephropathy and type 1 diabetic CKD. And for Omav, you talked about potentially expanding into new neurological indications like ALS or Huntington's. What's holding you back presently now that you've raised money? Was it a financial constraint? Is it a kind of a resource internal constraint? And do you think we'll be able to get more visibility on when these programs will move forward over the next year or so? Thanks.
Warren Huff -- Founding Chief Executive Officer and President
Yes, well at the appropriate time, we will definitely provide guidance about which pivotal programs are going to come next, and what we expect the timing to be. I would say we've been managing our both financial and human resources very carefully as a company. And I think if you look at our -- if you look at the opportunity for development across our portfolio, I mean, as you said, there's an opportunity to begin a number of additional registrational studies in rare forms of CKD. We have a number of really good opportunities for our Nrf2 activators, Omav in neurologic disease. And we actually have two other really solid Phase 2 ready assets behind that with novel mechanisms and broad applications. And so we've got a really deep pipeline, and we definitely feel regularly constrained by the availability of both human and financial resources to pursue all of the things that we'd like to do.
Adam Walsh -- Stifel Financial Corp. -- Analyst
All right, that's fair. And then, really quickly on PAH. If and when let's say you get good data that's approved, would you expect to build out a commercial sales force to target pulmonologists? Or would you just market in CKD and let the study stand on its own? How would you approach commercial in PAH? Thanks.
Warren Huff -- Founding Chief Executive Officer and President
It's a good question, but I'm not really going to speculate about it until we -- we actually have to see the data, the quality of the data, and what the clinical benefit was in all that before we could really evaluate -- make meaningful decisions about how we would go about the commercialization event.
Adam Walsh -- Stifel Financial Corp. -- Analyst
Thank you.
Operator
Thank you. Our next question comes from Brian Skorney with Baird. Your line is now open.
Brian Skorney -- Robert W. Baird -- Analyst
Hey, good morning guys. Just maybe ask kind of follow-up on the enrollment in the FALCON study. If I just look at the CARDINAL Phase 3 portion, it looks like it took about a year for you guys to enroll, fewer number of patients in the study, but pulling from a much smaller patient pool. Is there anything that we should be considering relative to the two studies and indications to keep in mind when thinking about enrollment timeline? Nothing -- knowing nothing besides just kind of sample size in the patient populations, it would be relatively similar in enrollment timelines.
Warren Huff -- Founding Chief Executive Officer and President
As I mentioned, the trial initiated enrollment last year. As we said, enrollment is ongoing and so we are not going to provide any more visibility into that today.
Brian Skorney -- Robert W. Baird -- Analyst
Great. And then, just when we think about powering assumptions for the CATALYST study, we have a broad range of placebos in sort of the general PAH. What should we kind of be thinking about and what are your assumptions underlying what placebo would look like on six-minute walk in this subgroup of PAH patients?
Warren Huff -- Founding Chief Executive Officer and President
Our powering assumptions are not only based upon data available in the literature from -- in the numerous trials that have been conducted, but also from the observed data within our LARIAT phased program. And so synthesizing all that, the trial can detect a difference of approximately 12.5 meters based upon the segregation assumptions in others' calculations.
Brian Skorney -- Robert W. Baird -- Analyst
Right. Thank you.
Operator
Thank you. Our next question comes from Charles Duncan with Cantor Fitzgerald. Your line is now open.
Charles Duncan -- Cantor Fitzgerald -- Analyst
Thanks guys for taking my question. Warren and team, congrats on a really fantastic year of progress. I'll stick with questions in -- on the neurology side of the house. I guess with regard to Omav and finally in the US for Friedreich's ataxia, is the data that you have necessary and sufficient to file? Or is the rate-limiting step discussion with agency or some other kind of clinical or non-clinical work that you're doing with that drug?
Warren Huff -- Founding Chief Executive Officer and President
So I think, Charles, as you know, previous to launch of part 2 of the MOXIe study, the FDA provided us with guidance that mFARS is acceptable as the primary endpoint for part 2 of the MOXIe study, and that it may consider either accelerated full approval based on the overall results of the trial and strength of the data. So as we mentioned multiple times now on the call, we're in discussions with FDA regarding the next regulatory steps and are continuing with our preparations to submit an NDA. We're not going to provide any additional detail at this time.
Charles Duncan -- Cantor Fitzgerald -- Analyst
Okay, that's fair. And then when you think about the build-out of the commercial infrastructure for Alport versus Friedreich's, I guess, I'm wondering, are there synergies that you can realize in that approach, maybe it's back office work or would it make sense to consider two different, call it, sales forces? And then as an add-on to that, when you're thinking about Omav and moving forward with other indications, when could we see initial clinical activity first, call it, next steps beyond Friedreich's?
Manmeet S. Soni -- Chief Financial Officer and Executive Vice President
Sure. So Charles, this is Manmeet. I'll take your first question regarding the synergies on commercial sales force and other. So the answer is yes. And certainly, there are synergies as you would see not only just back office, but also on market access and sales operation activities and planning activities, so all that have synergies. The only thing which we would have is a different sales team for Omav versus Bard because they will have different targets. But still, as you know, we have a very -- this is a rare disease and we are not expecting a huge sales force for both of those indications. So there are synergies. On top of that, there will be very limited sales force to expand, and to further add, I would also say that Omav is [Phonetic] certainly Friedreich's ataxia that's such well diagnosed population, and with nine centers of FAs, centers of excellence and other FA centers, I think they're very concentrated with few places. So we will not need even -- like not more than couple -- dozen of sales force over there. So yes. To answer your question, yes, there are a lot of synergies on the back office and on the marketing side. Anything else Warren you would like to add?
Warren Huff -- Founding Chief Executive Officer and President
I'll add in to your second question, Charles. And so as you know, the underlying biology and pharmacology of Omav is not specific to Friedreich's ataxia. And we've demonstrated preclinical activity in a wide range of models, including Parkinson's disease, various forms of dementia, epilepsy, Hunt's disease, ALS, even Alzheimer's disease. We have data from ex-vivo patient biopsy samples, demonstrating that Omav can restore mitochondrial dysfunction, which is suppressed in several different forms of neurological disease beyond FA. And so right now, we're going to actively triaging what the next clinical trials would be. I think we publicly stated that we plan to initiate one or more trials in the next three [Phonetic] years with Omav. So we expect to have some discussion about that in the future, but we're really excited about the opportunity for Omav. And it had activity in a very difficult patient population of FA, where there've been approximately 15 prior failed trials. And we think, once again, that underlying pharmacology is relevant to many settings. And so stay tuned for more discussions and concrete guidance about our next clinical progresses [Phonetic].
Charles Duncan -- Cantor Fitzgerald -- Analyst
Sounds good. Will stay tuned. Thanks.
Joseph Schwartz -- SVB Leerink -- Analyst
Thank you. [Operator Instructions] Our next question comes from Joseph Schwartz with SVB Leerink. Your line is now open. Great. Thanks so much and congrats on the progress as well. I was wondering if you could give us an update on the status of the ongoing CKD study for bardoxolone in Japan. Can you remind us of the timeline for that? And is the work being done there? Does it differ materially from what was done in BEACON and BEAM?
Warren Huff -- Founding Chief Executive Officer and President
Sure. So Kyowa Kirin's trial called AYAME is a Phase 3 outcomes trial in diabetic CKD. It's different from the BEACON trial, which we conducted years ago in several ways. Number one, excludes patients at risk for fluid retention; number two, they're enrolling a much broader range of CKD patients; and number three, the endpoint is different. And so the primary endpoint of the trial is composite first of time to 30% reduction in eGFR that's confirmed or dialysis. As far as timing, they've publicly stated that enrollment was completed last year. And they've publicly guided to data availability from the trial in the first half of '22.
Joseph Schwartz -- SVB Leerink -- Analyst
Great. Thank you. And then you've noted your robust IP for both Bard and Omav. I was just wondering if you could touch upon that and highlight the claims that you think are most robust, and what your expectations for LOE are.
Warren Huff -- Founding Chief Executive Officer and President
Sure. Starting with bardoxolone, it's protected by a battery of claims that include composition of matter on the novel amorphic form of the drug, which has a very significant impact on the dosing. The novel amorphic form, I believe, [Indecipherable] 4.5-fold more potent than the other crystalline forms. And also there is very broadly worded method of use patents that I think, basically go to use of bardoxolone to improve kidney function in patients with CKD, which would basically be essentially right on the label. And let me correct me, but I think that we estimate that kind of with extensions based on the development history that the protection would be essentially on those from 2034 -- 2033 to 2034, we would have exclusivity.
Manmeet S. Soni -- Chief Financial Officer and Executive Vice President
That's for Bard.
Warren Huff -- Founding Chief Executive Officer and President
... for bardoxolone.
Manmeet S. Soni -- Chief Financial Officer and Executive Vice President
And Omav could get up to 2035 in US and 2036 in Europe.
Warren Huff -- Founding Chief Executive Officer and President
Yeah, on its composition of matter claims.
Joseph Schwartz -- SVB Leerink -- Analyst
Okay. Great. Thanks for taking my questions.
Operator
Thank you. And I'm showing no further questions in the queue at this time. Ladies and gentlemen, thank you for your participation on today's conference. As a reminder, an audio recording of the call will be available shortly after this conference call on Reata's website at reatapharma.com in the Investors section. Thank you very much for your participation. You may now disconnect.
Duration: 32 minutes
Call participants:
Vinny Jindal -- Vice President of Strategy
Warren Huff -- Founding Chief Executive Officer and President
Manmeet S. Soni -- Chief Financial Officer and Executive Vice President
Samantha Semenkow -- Citigroup -- Analyst
Maury Raycroft -- Jefferies LLC -- Analyst
Adam Walsh -- Stifel Financial Corp. -- Analyst
Brian Skorney -- Robert W. Baird -- Analyst
Charles Duncan -- Cantor Fitzgerald -- Analyst
Joseph Schwartz -- SVB Leerink -- Analyst
