Last week, Reata Pharmaceuticals ( RETA 11.24% ) closed its secondary offering, raising a whopping $505 million by selling shares at $183 per share, tripling the $240 million nest egg the biotech had at the end of the third quarter.
Technically, the company didn't need to raise capital right now; based on its planned burn rate, Reata had enough cash to get it through next year. But after a very successful October in which Reata's shares jumped more than 150%, it certainly a good time for management to raise capital. Selling shares at the higher price means the company could raise the same capital selling fewer shares, which causes less dilution for current shareholders.
Two late-stage assets
Reata's successful October came when the company released phase 2 data for omaveloxolone in patients with Friedreich's ataxia, a neurodegenerative disease with no FDA-approved treatments.
Using the modified Friedreich's Ataxia Rating Scale (mFARS), Reata measured a placebo-corrected 2.40-point improvement after 48 weeks of treatment. Patients taking omaveloxolone improved by 1.55 points on mFARS, while patients taking a placebo experienced a 0.85-point worsening in their mFARS score.
This was only a phase 2 study, but the lack of current treatments for Friedreich's ataxia makes it likely that the FDA will approve omaveloxolone with the data Reata has already generated. It should also be noted that the 103-patient study was the largest global, interventional study ever conducted in patients with Friedreich's ataxia.
In addition to omaveloxolone, Reata is also developing bardoxolone methyl (Bard) for a variety of diseases of the kidney and vascular system.
Earlier this month, Reata presented data from the Cardinal study testing the drug as a treatment for chronic kidney disease (CKD) caused by Alport syndrome, a genetic disease that results in the loss of kidney function.
After 48 weeks of treatment, Bard produced a 9.50 milliliter-per-minute (mL/min) increase in estimated glomerular filtration rate, a measure of kidney function, compared to the placebo. After the drug was removed for four weeks, Bard still beat the placebo by 5.14 mL/min. The trial is scheduled to run for another year, but the FDA has indicated that one year of data may be enough for accelerated approval.
The Cardinal results bode well for another phase 3 clinical trial, the Falcon study, testing Bard in patients with autosomal dominant polycystic kidney disease. Further back in development, Reata is also testing Bard in other kidney diseases: immunoglobulin-A nephropathy, focal segmental glomerulosclerosis, and CKD associated with type 1 diabetes.
Bard is also in a phase 3 study called Catalyst in patients with connective tissue disease associated with pulmonary arterial hypertension (CTD-PAH). Like the aforementioned kidney diseases, CTD-PAH is caused by inflammation and scaring, albeit in the circulatory system rather than the kidneys.
The positive result in Alport syndrome is a good indication that Bard is hitting its target and activating a protein called Nrf2. Whether Nrf2 activation is enough to help patients with CTD-PAH remains to be seen.
Capital to launch
The large capital infusion sets Reata up nicely to launch omaveloxolone and Bard in the coming years. Drug launches aren't cheap, and neither is running clinical trials to test existing drugs in new diseases; Reata's added cash provides an opportunity to do both.
The capital also puts Reata in a better negotiating position should a large pharmaceutical company decide that it wants to license one of Reata's drugs or acquire the company outright. Having the cash to launch on its own means Reata won't feel compelled to accept any lowball offers thrown its way.