Reata Pharmaceuticals, inc (RETA) Q3 2021 Earnings Call Transcript

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Reata Pharmaceuticals, inc (RETA)
Q3 2021 Earnings Call
Nov 8, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Thank you for standing by and welcome to the Reata Pharmaceuticals' Third Quarter 2021 Financial Results and Update on Development Programs Conference Call. An audio recording of today's webcast will be available shortly after the call in the Investor section of Reata's website at reatapharma.com.

Before the Company proceeds with its remarks, please note the forward-looking statements disclosure in the company's press release. There are many factors that could cause results to differ from expectations, including those noted in the Company's SEC filings. On today's conference call, non-GAAP financial measures will be used to help investors understand the business performance. These non-GAAP financial measures are reconciled with comparable GAAP financial measures in Reata's earnings release and presentation from today, which can be found on Reata's website. Today's statements are not guarantees of future outcomes. Please also note that any comments made on today's call apply only as of today, November 8, 2021, and may no longer be accurate at the time of any webcast replay or transcript rereading. Following the prepared remarks, we will open the call up for questions.

[Operator Instructions]

We are joined today by Reata's Chief Executive Officer, Warren Huff; Chief Research and Development Officer, Colin Meyer; Chief Commercial Officer, Dawn Bir and Chief Operating and Chief Financial Officer, Manmeet Soni. At this time, I would like to turn the call over to Warren Huff.

J. Warren Huff -- Chief Executive Officer and President

Good morning, everyone. We thank you for joining us today for our quarterly update. As you know, our new drug application for bardoxolone for the treatment of patients with chronic kidney disease caused by Alport syndrome is currently under review by the FDA. Alport syndrome is a severe, rare, genetic form of chronic kidney disease with no therapies specifically approved for these patients. The FDA scheduled an advisory committee meeting for our NDA on December 8 and we've been actively preparing for the Advisory Committee meeting. Colin will expand more on this later in the call. The PDUFA date for the NDA is February 25, 2022. In addition to our regulatory activities, we're actively preparing for commercial launch of bardoxolone, subject of course to FDA approval. Additionally, we recently announced that we submitted a marketing authorization application to the European Medicines Agency for bardoxolone for the treatment of patients with CKD caused by Alport syndrome. Finally, we recently reported that we completed our pre-NDA meeting with the FDA for our development program for omav for the treatment of patients with Friedreich's Ataxia. FA is a severe inherited degenerative neuromuscular disorder, no approved therapies. We're in the process of completing the NDA in plan to submit it during the first quarter of 2022. I'll now turn the call over to Colin, who will provide an update on our preparation for the FDA's upcoming Advisory Committee meeting for bardoxolone, a clinical update for bardoxolone in rare forms of CKD and a regulatory update on our program with omav for patients with FA. Next, Dawn will outline preparations for commercial launch. And finally, Manmeet will provide an update on our financials and operations.

Colin Meyer -- Chief Research and Development Officer and Executive Vice President

Thanks, Warren. Hey good morning, everyone. Starting on Slide 5, as Warren mentioned, we have been actively preparing for the Advisory Committee meeting for Bardoxolone, which is scheduled for December 8 and I will provide more information about the preparations. We are pleased to report that we recently submitted our marketing authorization application to the EMA and look forward to working with EMA toward securing approval for bardoxolone for the treatment of patients with CKD caused by Alport Syndrome in Europe. We are also happy to report that the NDA submitted in Japan by Kyowa Kirin, our strategic collaborator, is currently under review. We are also working with Kyowa Kirin to assist them in their regulatory process with the PMDA.

Turning to Slide 6. We continue to actively prepare for the upcoming AdCom and we have submitted our briefing book for the meeting to the FDA. Over the past few months, we have been working with external key opinion leaders in multiple disciplines to join us for the AdCom meeting. Additionally, we have already conducted several mock meetings and question-and-answer sessions with former panelists and regulators to prepare for potential questions and discussion topics. We continue to refine our analysis to ensure we'll be prepared for an active discussion with the committee on the efficacy and safety profile of bardoxolone for patients with CKD caused by Alport syndrome. Next slide.

Moving to our program in autosomal dominant polycystic kidney disease, the most common hereditary form of CKD, we are continuing to conduct our Phase 3 FALCON trial. We are currently enrolling patients across approximately 100 sites globally. Last quarter, we announced that we have received feedback from the FDA regarding our ADPKD program following a Type B meeting. The primary endpoint of the study is the off-treatment eGFR change from baseline versus placebo at week 104. We will be analyzing the primary endpoint using only data at week 104, irrespective of time-off treatment. Patients who discontinued treatment early will have shortened treatment exposure and a longer off-treatment duration, which is expected to dilute the treatment effect. We are increasing the sample size from 550 to 700 patients to account for the dilution and treatment effect from discontinued patients. More than 450 patients are currently enrolled in the study, and we now expect to complete enrollment by the middle of 2022.

Finally, on Slide 9. As Warren mentioned, we recently reported that we completed our pre-NDA meeting for development program for omaveloxolone for the treatment of patients with Friedreich's ataxia. The purpose of the pre-NDA meeting was to discuss the content of Reata's planned NDA submission. Based on the results of the pre-NDA meeting, we are not planning to conduct a second preapproval clinical study prior to the NDA submission. In response to our questions about the contents of the filing, and because of the seriousness of the indication, the FDA exercised its discretion, subject to review, to permit us to submit results of certain clinical pharmacology and nonclinical studies after approval. We will continue to finalize NDA package for submission during the first quarter of 2022.

With that, I would now like to turn the call over to Dawn to provide an update on our commercial preparations.

Dawn C. Bir -- Chief Commercial Officer and Executive Vice President

Thank you, Colin. Good morning, everyone. I'll continue on Slide 11. This is both an exciting time and a unique time as Reata now has two potential product launches in site. As we look ahead to 2022 and a PDUFA date of February 25, we are actively preparing for the launch of bardoxolone for the treatment of CKD caused by Alport syndrome and inherited and rapidly progressing kidney disease with no approved therapy.

Following the positive news of our pre-NDA meeting, we are also reinitiating launch readiness efforts for omaveloxolone, if approved omaveloxolone will be the only FDA approved treatment for Friedreich's ataxia, a rare and life-shortening neuromuscular disease impacting children and young adults. Our commercial infrastructure is in place including our core leadership team, a team of experienced biotech professionals representing marketing, market access, commercial operations, and sales. We've hired, trained, and deployed Reata's first payer field team with an initial focus on Alport syndrome. Their primary responsibility is to facilitate coverage of our products to label following approval with the top US commercial payers, Medicare and state Medicaid programs. Recent pricing and value research confirmed our previous studies, reflecting that both payers and physicians see high unmet need in Alport syndrome and place high value on a specific treatment option when presented the bardoxolone product profile.

We've identified highly influential thought leaders who shaped the treatment landscape of CKD, rare kidney diseases and Alport syndrome. We are now leveraging their insights through final market research and preparing engagement plans that support commercial launch pull-through. Customer targeting and segmentation is complete. This was used to determine our appropriate nephrology sales force size and territory alignments. On November 1, our team of Nephrology Region Business Directors joined Reata. Their first task is to build our sales organization, identifying experienced kidney and rare disease sales professionals to join our team early next year. Now with Friedreich's ataxia back in focus, we're advancing similar commercial work to prepare us for the launch of omaveloxolone in neurology. For both therapeutic areas, disease awareness efforts will continue through approval and launch, highlighting the significant unmet need, the urgency to treat and the severity of these life-threatening diseases.

I will now turn the call over to Manmeet to provide a summary of our financials and operations for the quarter.

Manmeet S. Soni -- Chief Operating Officer, Chief Financial Officer and Executive Vice President

Thanks, Dawn. Good morning, everyone. Please refer to our press release issued earlier today for a summary of our financial results from the third quarter of 2021. Let me start with our cash balance on Slide 13. As of September 30, we maintained a solid balance sheet with approximately $713.2 million in cash and cash equivalents. In keeping with our current guidance, we expect our cash balance to fund our operations through mid-2024.

Moving to expenses. Our R&D expenses for the quarter were $39.4 million as compared to $37.2 million in the third quarter of 2020. Higher R&D expenses were primarily due to increased personnel costs to support the product development activities. G&A expenses for the quarter were $25.7 million, compared to $18.3 million for the third quarter of 2020. Higher G&A expenses were primarily due to increased spend related to commercial readiness activities and personnel costs to support growth in our development activities. Our GAAP net loss for the third quarter of 2021 was $71.8 million as compared to a net loss of $65.5 million for the same period of the prior year. Our non-GAAP net loss for the third quarter of 2021 was $46.2 million as compared to a non-GAAP net loss of $44.3 million for the same period of the year prior. The increases in GAAP and non-GAAP net loss are primarily driven by increased personnel cost and commercial launch readiness activities.

Moving to Slide 14, which is our reconciliation of GAAP to non-GAAP financial measures, non-GAAP research and development, non-GAAP G&A expenses and non-GAAP operating expenses exclude stock-based compensation expense, while non-GAAP net loss also excludes other income and expense items.

To summarize, our non-GAAP operating expenses were $51.8 million during the third quarter of 2021 as compared to $44.2 million for the same period of the year prior. Increase in operating expenses is primarily driven by product development and commercial launch readiness activities.

On the operations front, Reata's current and planned inventories of investigational product and potential commercial product are adequate to cover demand for next several years. We continue to invest in our medical affairs team to increase disease awareness and education in the nephrology community for Alport syndrome. We have also initiated building our European infrastructure to prepare to launch in Europe and other countries.

With that, I will turn the call back over to Warren.

J. Warren Huff -- Chief Executive Officer and President

Thanks, Manmeet. As our presentation today indicates, we're making significant progress across our broadening set of programs. We remain focused on working with the FDA during their review of our NDA for bardoxolone and on completing our preparations for the December 8 Advisory Committee meeting. In addition, we continue to make steady progress in our other programs in CKD. We've now submitted an MAA with the EMA for bardoxolone for the treatment of patients with CKD caused by Alport syndrome. Finally, we remain dedicated to advancing omav in Friedreich's ataxia and look forward to updating you on the next steps for this program as we prepare to submit the NDA during the first quarter of 2022.

That concludes our prepared remarks. We'd like to thank everyone who dialed in. And I'll now turn the call over to the Operator for questions.

Questions and Answers:

Operator

[Operator Instructions]

Our first question comes from Yigal Nochomovitz from Citigroup. Please go ahead. Your line is open.

Yigal Nochomovitz -- Citigroup -- Analyst

Hi. Thank you very much for taking the questions. I have three interrelated ones. First of all, have there been any additional questions posed by the FDA on the Alport NDA since [Indecipherable] And if so, can you discuss them? Second, regarding the steps to prepare the panel column, what issues have you identified on the mock panels where you feel we need to clarify or revise presentation? And thirdly, can you identify the two or three biggest questions around bardoxolone's efficacy and safety profile that you believe you need to successfully address at the AdCom to provide a framework for a positive panel book? Thank you.

J. Warren Huff -- Chief Executive Officer and President

Thanks, Yigal. I'll start and then hand it over to Colin. We're not going to comment any further on our day-to-day interactions with the FDA. So we won't be discussing, like, those. So I think the issues that we think are the key issues were the ones that the FDA set forth in the mid-cycle meeting and that we disclosed last quarter.

Colin Meyer -- Chief Research and Development Officer and Executive Vice President

Yes. And just one additional point, Yigal. The purpose of the mid-cycle review meeting was for FDA to disclose us the issues that they raised. And so the plan had been to be able to provide them with additional information to address any remaining concerns. And getting to your second and third questions about AdCom preparation and biggest questions, I think the -- as you know, the FDA will provide a briefing document, in addition to us, and they will frame their questions around the main topics that we've been addressing with them. And so recall in mid-cycle review meeting, there were four significant issues that they raised. And there were no significant safety concerns. And they said they do not expect REMS. And so we'll be prepared to address all topics, including safety topics. And we're focusing our preparation on basically clinical meaningfulness of GFR change over time. That's the central issue with any kidney program that does not have outcomes data. And so being able to clearly articulate that our endpoints are a derivative of the NKF working group where they show that even a change as small as 0.7 ml per minute per year, over two years, is associated with reduced clinical outcomes. And as we discussed before, after two years, our on-treatment changes 7.65 ml per minute in the primary endpoint and in the key secondary off-treatment point, it's 4.26 ml per minute and so much, much larger changes. And so I think there'll be a lot of probing about that and how do you interpret data. And we believe we'll be adequately prepared to address any of those questions.

Yigal Nochomovitz -- Citigroup -- Analyst

Thank you.

Operator

Thank you for your question. Our next question comes from Salveen Richter from Goldman Sachs. Salveen, please go ahead. Your line is open.

Tommy -- Goldman Sachs -- Analyst

Thank you for taking the question. This is Tommy on for Salveen. And about your AdCom preparations, what, in particular, is driving your confidence heading into the event? Thank you.

J. Warren Huff -- Chief Executive Officer and President

We've -- I think, known the issues for bardoxolone for some time because of our extensive element history. We've had several years to address questions that have been raised about the mechanism since it is novel, the clinical profile, including both efficacy and safety. And so -- and FDA, we believe has been transparent with us to raise any remaining key issues. And so as I just mentioned in response to Yigal's question, we are prepared to address those and other questions. The data set from Alport syndrome trial is somewhat small because it's a rare disease. We enrolled 157 patients in the trial. But there's two years' worth of data plus data that's accumulating in the extension study that we believe helps to clarify the profile over time. But it's not just data from those 157 patients, it's data from the broader data set. And so we've exposed approximately 2,500 people to bardoxolone. And so that gives us a large amount of data to interrogate the clinical profile, both safety and efficacy and address any real or perceived concerns.

Operator

Thank you for your question. We will now move on to Maury Raycroft from Jefferies. Please go ahead.

Maury Raycroft -- Jefferies -- Analyst

Hi. Good morning and thanks for taking my questions. Just as a follow-up to your earlier response. I think part of the plan was to submit your four statistical rebuttals to FDA soon after your 2Q call. Can you say if the four rebuttals were adjusted at all since your 2Q update? Or were they as you presented them in 2Q?

J. Warren Huff -- Chief Executive Officer and President

I would say that, once again, we're not going to comment on our day-to-day interactions with FDA, but the plan had always been to respond. And then we're always continuing to refine any potential questions, and that's part of this process. So occasionally, FDA will ask additional questions or they may not. And we've had extensive preparations for AdCom. I mean, literally, it was every single day that we do mock sessions. Some of them are very formal with prior panels who actually sat on the Card Act Committee. We've been working with x regulators from this and other divisions. And so occasionally, we will realize that there could be a new analysis that will further support our position. And so I think we're continually iterating. And we may or may not provide that to FDA in advance or we may just have that as backup information for the actual outcome.

Maury Raycroft -- Jefferies -- Analyst

Got it. That makes sense. And for the briefing documents, I think the public will get those closer to the AdCom, but I'm just checking to see if you've received a draft set of discussion topics and questions from FDA yet? And do you know who's going to be on the panel at this point and who's going to be joining you yet?

Colin Meyer -- Chief Research and Development Officer and Executive Vice President

Yes. We wouldn't expect to receive the FDA briefing document or that additional information until a couple of weeks before the AdCom based on their guidance as to timing.

J. Warren Huff -- Chief Executive Officer and President

Yes, you can find that in the formal guidance on FDA's web page. The public will see our briefing document and FDA's briefing document approximately 48 hours before the meeting. Their standing members on the panel, and so once again, it's on FDA's web page. The ad hoc members won't be disclosed to us or the public until about two days prior. And then, as I mentioned during our prepared remarks, we do have several external KOLs that cover many disciplines. And we will not disclose those specific individuals until about two days prior.

Maury Raycroft -- Jefferies -- Analyst

Got it. Okay. Thanks for taking my questions.

Operator

Thank you. Our next question comes from Annabel Samimy from Stifel. Please go ahead. Your line is open.

Annabel Samimy -- Stifel -- Analyst

Hi. Thanks for taking my questions. I just wanted to ask about the recent ASN updates specifically on EAGLE. There were some more patients that were released this week. And obviously, bardoxolone continues to show eGFR benefit, although declining a bit. Can you just go into a little bit more detail or give us some other color or things that we should be thinking about and some of the critical points that you drew from the EAGLE data that was presented this week? And then separately on the FALCON trial, if you could just give us a sense, the statistical hit that you're taking for the discontinuations, can you give us a little bit more sense of what discontinuation rate you assume there and how you're going to be treating these patients? Thanks.

J. Warren Huff -- Chief Executive Officer and President

Yes. And so the EAGLE data, it has been very helpful for us to be able to characterize the longer-term efficacy and safety profile. We released in the end of 2019 for a number of patients who've completed three total years of treatment. There's obviously more patients who have not reached year three, and there's a good amount of patients who were initially randomized to placebo during the pivotal CARDINAL trial who have since rolled over to EAGLE. And so those data demonstrate a profile as to clinically meaningful and durable improvements through three years of treatment. And so if you have access to the poster, I believe that's on our website, we see a similar profile in year one and two as that compared to the randomized population for bardoxolone in CARDINAL. And we see the curve over time on treatment flatten out in the second year, and that continues in the third year. And patients are still above baseline by about 6 mL per minute after three years. And so that's a very large increase in the context of the historical rate of decline, which is approximately 5 mL per minute per year, which we collected for most patients prior to enrollment in CARDINAL. And furthermore, the placebo rate of decline was approximately 4 mL to 5 mL per minute. And so these data to us are reassuring, and we will be releasing additional data in the future with larger MSAT [Phonetic] appropriate venues. From the FALCON perspective, and so yes, the statistical hit is that we will be including patients who discontinued from the trial in the week 104 analysis, which is different from the analysis at week 104 in the CARDINAL trial. Here, we can power the trial so that we can effectively run a week 104 analysis without including early values. And we know based upon the adverse event profile that most patients who discontinue the trial do so earlier. And so based upon the CARDINAL trial, we know that patients who discontinued early behave like placebos. And so we're simply modeling in a conservative rate of discontinuations so that we can still maintain hopefully a very significant p-value in the FALCON trial upon its completion. And so I won't provide the discontinuation rate, but it's a conservative rate.

Annabel Samimy -- Stifel -- Analyst

Okay. Great. Thank you.

Operator

Perfect. Thank you, Annabel. We will move on to Brian Skorney from Baird. Please go ahead.

Brian Skorney -- Baird -- Analyst

Hey. Good morning everyone. Thanks for taking my question. Also on FALCON, I was wondering if you can comment at all on the rate of progression to ESRD that you would expect in these patients, either just the expectations in this patient population or the actual rate that you're seeing, would obviously be more helpful? Just trying to understand if you saw -- given the size here, if there's an equivalent reduction in progression to ESRD in the study that you saw in CARDINAL and BEACON, if the sample size is big enough to approach statistical significance?

J. Warren Huff -- Chief Executive Officer and President

We would expect very few patients to actually reach kidney failure, so dialysis or transplant. The rate of progression that we're expecting should be similar to what was observed in the placebo group in the REPRISE trial because we have very similar eligibility criteria. And so even if the rate progression is 3 to 4 mL per minute per year based upon a minimum GFR of 30% in the trial and a treatment duration of two years, we would expect only outliners would hit that. But we do have an endpoint that's included, that is a kidney composite that includes time to first of actual kidney failure or confirmed reduction of eGFR of 30% or confirmed eGFR less than 15%. And so the trial is not powered for that. We don't want to set any expectations. If you look at the REPRISE trial, they did not put significant factual kidney outcomes, but with a large number we should have high confidence with the eGFR trajectories over time.

Brian Skorney -- Baird -- Analyst

Great. And then sorry if I missed it. But I didn't hear if there's an update on MERLIN? Are we still going to get to see those results this quarter?

J. Warren Huff -- Chief Executive Officer and President

We are going to have those results in the first quarter and so a slight adjustment. We're obviously very busy in our primary -- on the developed R&D side our primary tasks are to get through AdCom successfully and then submit our omav NDA in the first quarter. And so MERLIN would be helpful, but it's primarily set up for a future Phase III trial. And so we'll have those results in the first quarter.

Brian Skorney -- Baird -- Analyst

Great. Thank you.

Operator

Thank you very much for your question.

[Operator Instructions]

And we have a question from Joseph Schwartz from SVB Leerink. Please go ahead.

Joseph Schwartz -- SVB Leerink -- Analyst

Thanks very much. I understand you don't want to give us a play-by-play of all of your interactions with the FDA on Bardoxolone alone. But I was just wondering if you can help us understand, in general, overall, whether the list of issues, which remain to be resolved, what the FDA seems to be narrowing or broadening since the mid-cycle meeting you had? And then I have a follow-up.

J. Warren Huff -- Chief Executive Officer and President

Joe, so once again, we're not give you day-to-day discussions, but I will say that the list had been much larger prior to the NDA submission. We cited many potential review topics in our annual report at the beginning of the year. And we were pleasantly surprised that there were only four significant issues during the mid-cycle review meeting. And by that point in FDA's review, they will have had to review most NDA and consolidate their thinking cross-functionally and start formulating, the key issues for the advisory committee. And so that number to us, was already small. Once again, we believe we have answers to adequately address those questions as well as any other potential questions that have been raised in the past or may be raised at the meeting.

Colin Meyer -- Chief Research and Development Officer and Executive Vice President

And I would just add one thing, and that is that while it's called mid-cycle, it's actually very late in the review process normally.

Joseph Schwartz -- SVB Leerink -- Analyst

Thanks, Warren. Very helpful. Also, I appreciate it. And then could you give us some metrics around the marketing and sales organization you're planning for bardoxolone? And whether you expect or where you expected to size wise and reach wise relative to the PDUFA date, how many reps and MSLs, do you expect to hire before then versus later?

Dawn C. Bir -- Chief Commercial Officer and Executive Vice President

Thanks for your question. And we're certainly excited about the time that we're in right now and we're really on track for successful commercial launch in Q1 of next year and so while we're not providing guidance on the exact number of head count, we have hired our region sales directors who are busy recruiting and actively interviewing for our future sales organization. We also have deployed a payer field team that's engaging with customers at this time. And so as, through a claims data analysis, we can assess the market, the number of patients, the physicians treating that population. And so we've designed our sales organization to support the need of reaching those customers.

Joseph Schwartz -- SVB Leerink -- Analyst

Thanks again.

Operator

[Operator Closing Remarks]

Duration: 31 minutes

Call participants:

J. Warren Huff -- Chief Executive Officer and President

Colin Meyer -- Chief Research and Development Officer and Executive Vice President

Dawn C. Bir -- Chief Commercial Officer and Executive Vice President

Manmeet S. Soni -- Chief Operating Officer, Chief Financial Officer and Executive Vice President

Yigal Nochomovitz -- Citigroup -- Analyst

Tommy -- Goldman Sachs -- Analyst

Maury Raycroft -- Jefferies -- Analyst

Annabel Samimy -- Stifel -- Analyst

Brian Skorney -- Baird -- Analyst

Joseph Schwartz -- SVB Leerink -- Analyst

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