Warren Huff, Reata CEO

Rea­ta sug­gests Friedre­ich's atax­ia pro­gram could be de­layed, send­ing stock plung­ing

Rea­ta Phar­ma­ceu­ti­cals $RE­TA made waves last Oc­to­ber when its drug omavelox­olone pro­duced pos­i­tive tri­al re­sults in treat­ing a rare neu­ro­log­i­cal dis­or­der, but the can­di­date’s path for­ward be­came much murki­er Mon­day.

In a re­port of quar­ter­ly earn­ings, the biotech di­vulged that the FDA is con­sid­er­ing de­lay­ing omavelox­olone’s NDA pend­ing com­ple­tion of a sec­ond tri­al. That could push back ap­proval by at least a year giv­en that the tar­get pop­u­la­tion, in­di­vid­u­als with Friedre­ich’s atax­ia, is lim­it­ed and pro­gres­sion of the hard-to-treat ill­ness is no­to­ri­ous­ly slow. The Covid-19 pan­dem­ic would al­so hin­der Rea­ta’s abil­i­ty to com­plete an ad­di­tion­al tri­al.

The news shook Wall Street as Rea­ta stock closed down a lit­tle over 33% on the day.

Rea­ta’s pro­posed so­lu­tion to keep the de­lay as short as pos­si­ble in­volves sub­mit­ting a “crossover study” that would mea­sure the ef­fect of omavelox­olone in pa­tients who were pre­vi­ous­ly in the place­bo group and are be­ing treat­ed with the can­di­date in an open-la­bel ex­ten­sion study. Should the FDA ac­cept that ap­proach, Rea­ta ex­pects to com­plete the crossover study be­fore the end of the year and then sub­mit the NDA in the first quar­ter of 2021.

If the pro­pos­al is re­ject­ed or the da­ta do not re­turn pos­i­tive re­sults, how­ev­er, the biotech will re-eval­u­ate whether or not a sec­ond tri­al as out­lined is fea­si­ble. Re­gard­less of the out­come, Rea­ta not­ed it will con­tin­ue to pur­sue ap­proval out­side the Unit­ed States.

An­a­lysts did not im­me­di­ate­ly know what to make of the up­date. SVB Leerink’s Joseph Schwartz wrote to in­vestors that while Rea­ta seemed con­fi­dent it could per­suade the FDA to ac­cept its crossover tri­al, the biotech gave no in­di­ca­tion to which way reg­u­la­tors were lean­ing and “would not pro­vide guid­ance on how they ex­pect these dis­cus­sions to progress.” Schwartz fur­ther said that the pos­si­bil­i­ty of a first-quar­ter NDA “re­mains to be seen” and that their mod­el for Rea­ta’s stock pro­jec­tion is un­der­go­ing re­view.

With­in the quar­ter­ly up­date, Rea­ta al­so dis­closed that the FDA raised ques­tions about its oth­er lead pro­gram bar­dox­olone re­gard­ing Phase III tri­al re­sults with­in the sec­ond year of the study. If those re­sults are avail­able be­fore the year is out, the biotech could sub­mit the da­ta be­fore reg­u­la­tors make a de­ter­mi­na­tion on ac­cel­er­at­ed ap­proval, push­ing back the PDU­FA date but al­so re­sult­ing in full ap­proval in­stead. If full ap­proval is in­deed the route, the NDA fil­ing would be de­layed to the first quar­ter of 2021.

Again, Schwartz not­ed that Rea­ta did not hint at when the FDA be­gan ques­tion­ing the da­ta for this pro­gram. He went on to write that the biotech had po­ten­tial­ly spooked in­vestors with “less as­sertive” lan­guage in their 2019 10-K com­pared to their 2018 fil­ing, and the com­pa­ny would again not say whether this change co­in­cid­ed with reg­u­la­tors’ con­cerns.

Baird an­a­lyst Bri­an Sko­r­ney took a dif­fer­ent view, how­ev­er, call­ing the nose­dive an “over­re­ac­tion.” He not­ed that while con­cerns about omavelox­olone are “valid” and the drug’s ap­proval could be pushed as far back as 2023, bar­dox­olone is like­ly to pull a big­ger haul.

This is not the first time Rea­ta has faced head­winds in the last 12 months. Short­ly be­fore re­veal­ing their pos­i­tive omavelox­olone da­ta, Rea­ta un­cer­e­mo­ni­ous­ly de­cou­pled from a part­ner­ship with Ab­b­Vie that cost the biotech $330 mil­lion. Rea­ta was al­so forced to halt some tri­als due to Covid-19 com­pli­ca­tions, but con­tin­ued oth­ers by adapt­ing to at-home blood draws as op­posed to clin­ic vis­its.

The deal­ings with Ab­b­Vie go back sev­er­al years, as the com­pa­nies signed two part­ner­ships in rapid suc­ces­sion to the tune of $850 mil­lion in the ear­ly 2010s. But Ab­b­Vie sud­den­ly halt­ed its chron­ic kid­ney dis­ease stud­ies on bar­dox­olone in 2012 af­ter heart-re­lat­ed ad­verse ef­fects be­gan pop­ping up. Those ef­fects es­sen­tial­ly took the com­pound out of the run­ning in the CKD field, where CEO War­ren Huff had once vowed to make it a block­buster.

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Eli Lilly CSO Dan Skovronsky (file photo)

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The press release alone, devoid of any number except for the size of the trial, added nearly $20 billion to Eli Lilly’s market cap back in June. Now investors and oncologists will get to see if the data live up to the hype.

On Sunday at ESMO, Eli Lilly announced the full results for its Phase III MonarchE trial of Verzenio, showing that across over 5,000 women who had had HR+, HER2- breast cancer, the drug reduced the odds of recurrence by 25%. That meant 7.8% of the patients on the drug arm saw their cancers return within 2 years, compared with 11.3% on the placebo arm.

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Greg Friberg (File photo)

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Exelixis CEO Michael Morrissey (file photo)

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Donald Trump and White House chief of staff Mark Meadows, before boarding Marine One (Getty Images)

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Dan Skovronsky, Eli Lilly CSO

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Any $12 billion megablockbuster in the portfolio tends to overshadow everything else in the pipeline. Which is something Merck can tell you a little bit about.

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