Reata (RETA) Q2 Earnings Top, Omaveloxolone Setback Hurts

Reata Pharmaceuticals Inc. RETA reported second-quarter 2020 loss of $2.03 per share, narrower than the Zacks Consensus Estimate of a loss of $2.22. However, the reported loss was wider than the year-ago loss of $1.14.

However, the above loss included stock-based compensation and certain one-time items. Adjusted loss for the quarter was $1.22 per share, wider than 99 cents per share recorded in year-ago period.

Total revenues, comprising collaboration revenues, were $3.1 million compared with $7.8 million in the year-ago quarter. The significant decline was due to lower license and milestone payments received in the quarter. However, the top line beat the Zacks Consensus Estimate of $1.45 million.

Operating Expenses & Cash Position

Adjusted research and development expenses increased 4.9% year over year to $29.3 million mainly due to higher late-stage clinical activities.

Adjusted general and administrative expenses were $9.3 million, up 5.1% from the year-ago period.

The company had cash and cash equivalents of $610.4 million as of Jun 30, 2020 compared with $624.5 million as of March end.

Pipeline Update

Reata is developing its lead pipeline candidates — bardoxolone methyl (bardoxolone) and omaveloxolone — for rare forms of chronic kidney disease (“CKD”) and neurological diseases, respectively. Please note that Reata re-acquired development, manufacturing and commercialization rights related to omaveloxolone and bardoxolone from AbbVie ABBV last year.

In October 2019, the company announced that the pivotal phase II study — MOXIe — evaluating omaveloxolone, for treating Friedreich’s ataxia has met the primary endpoint. The company had a type C meeting with the FDA to discuss the study data and announced the outcome of the meeting on the second quarter earnings call. The FDA was not convinced that these results were enough to support an approval for the candidate without additional evidence and recommended conducting a second pivotal study. During its meeting with the FDA, the company convinced the regulatory authority to allow a crossover study instead of pivotal study for additional data. The FDA has asked to submit a design for the new study. The company expects to complete the second study by the fourth quarter, if the FDA approves the study design. However, this will delay the submission of a new drug application (“NDA”) by this year-end to first quarter of 2021. Moreover, if the FDA rejects the design or data are not supportive, the company stated that it will evaluate the feasibility of a second pivotal study and update accordingly.

Shares of Reata were down 33.2% on Aug 10, following the earnings release. The significant decline is presumably due to the proposed second study on omaveloxolone, as it will delay regulatory submission. In fact, the stock has declined 48.9% so far this year against the industry’s 5.4% increase.

Meanwhile, the company re-started enrolment in the phase III FALCON study evaluating bardoxolone in patients with autosomal dominant polycystic kidney disease in June. Enrollment in the study was stopped due to COVID-19 in the first quarter.

Meanwhile, the company is also evaluating bardoxolone in the pivotal phase III study — CARDINAL — in patients with CKD caused by Alport syndrome. Last year, the company reported positive top-line Year I data from the study, demonstrating statistically significant improvement in estimated glomerular filtration rate. The company remains on track to report Year II data during the first quarter of 2021.

The company has been granted a pre-NDA meeting by the FDA to discuss the submission content and plans for bardoxolone in Alport syndrome. The company anticipates two scenarios with the filing. If the FDA allows a NDA submission with Year I data, the company will file for accelerated approval by year-end. If the second-year results are available during an acceptable time frame following submission, the company will submit the data during the NDA review process, which may extend the review timeline but the FDA may grant a full approval.

In another scenario, if the FDA recommends to wait for Year II data, the NDA submission will be delay the filing until the first quarter of 2021. The filing with Year I & Year II data will be for full approval.

The company also announced initiation of an investigator-sponsored phase II study — BARCONA — during the second quarter to evaluate the effect of bardoxolone in patients with COVID-19.

Reata Pharmaceuticals, Inc. Price, Consensus and EPS Surprise

Reata Pharmaceuticals, Inc. price-consensus-eps-surprise-chart | Reata Pharmaceuticals, Inc. Quote

Zacks Rank & Stocks to Consider

Reata currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks from the biotech sector include Emergent Biosolutions Inc. EBS and Horizon Therapeutics HZNP, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Emergent Biosolutions’ earnings per share estimates have moved up from $3.45 to $5.60 for 2020 in the past 30 days. The company delivered an earnings surprise of 127.41%, on average, in the last four quarters. The stock has risen 141.3% so far this year.

Horizon Therapeutics’ earnings per share estimates have increased from $1.78 to $2.00 for 2020 in the past 30 days. The company delivered an earnings surprise of 43.99%, on average, in the last four quarters. The stock has surged 109.5% so far this year.

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