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Why Reata Pharmaceuticals Stock Is Diving Today Despite Q2 Beats

By Eric Volkman – Aug 10, 2021 at 4:15PM

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The FDA pours cold water on the company's better-than-expected quarter.

What happened

Reata Pharmaceuticals (RETA 0.75%) was having a terrible Tuesday, with its stock trading down by nearly 17% in late afternoon action. It scored earnings beats in its second quarter, but there was one notable cause for concern.

So what

After market hours on Monday, Reata published its second-quarter earnings. Revenue for the developer of drugs for rare diseases fell by 28% on a year-over-year basis to $2.22 million. Net loss for the period was $72.7 million, or $2 per share, a bit deeper than the year-ago deficit of $67.6 million.

Gloved and masked medical researchers using microscopes in their work.

Image source: Getty Images.

On average, though, prognosticators following the biotech were expecting worse. The average analyst projection for revenue was $1.25 million, and for per-share net loss it was $2.08.

That apparently positive news was tempered by Reata's accompanying update on its current clinical programs. While its omaveloxolone, a drug aimed at genetic disorder Friedreich's Ataxia, will happily be the subject of a pre-New Drug Application meeting with the Food and Drug Administration at some point this quarter.

On the down side, Reata said that regarding bardoxolone -- targeting a form of chronic kidney disease (CKD) -- "the FDA identified four significant clinical and statistical review issues for us to address."

Now what

This doesn't necessarily mean the end of bardoxolone; Reata believes that "each of the identified issues is addressable with additional data and analyses." Still, biotech investors are a grumpy bunch when a program triggers regulatory concern. Perhaps, then, this gives some room for Reata bulls to invest in the company on the cheap.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Reata Pharmaceuticals, Inc. The Motley Fool has a disclosure policy.

Stocks Mentioned

Reata Pharmaceuticals, Inc. Stock Quote
Reata Pharmaceuticals, Inc.
$38.98 (0.75%) $0.29

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