On February 20, 2020 Reata Pharmaceuticals, Inc. (Nasdaq: RETA) ("Reata," the "Company," or "we"), a clinical-stage biopharmaceutical company, reported financial results for the fourth quarter and full year ended December 31, 2019, and provided an update on the Company’s business and product development programs (Press release, Reata Pharmaceuticals, FEB 20, 2020, View Source;source=gmail&ust=1582354855075000&usg=AFQjCNHkerl-gpEGVj67JhlxLel2BJQtHw [SID1234554566]).
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"In 2019, we made significant progress toward our goal of becoming a global, fully-integrated biopharmaceutical company," said Warren Huff, Reata’s Chief Executive Officer and President. "We announced positive, pivotal data from our lead franchises, chronic kidney disease (CKD) and neurology, and are actively preparing for commercial launch in the United States and abroad for bardoxolone methyl (bardoxolone) in CKD caused by Alport syndrome, and omaveloxolone in Friedreich’s ataxia, two severe and life-threatening diseases without approved therapies. We also successfully capitalized the Company to fund the development of our pipeline assets and advance our lead drug candidates and early-stage drug candidates into new indications with high unmet need."
Reata 2019 Pipeline Highlights
Reported positive data from the pivotal part 2 portion of the Phase 2 MOXIe study of omaveloxolone in patients with Friedreich’s ataxia.
Reported positive data from year one of the pivotal Phase 3 portion of the CARDINAL study of bardoxolone in patients with CKD caused by Alport syndrome.
Launched the pivotal, global Phase 3 FALCON study of bardoxolone in patients with CKD caused by autosomal dominant polycystic kidney disease (ADPKD).
Completed enrollment in the pivotal Phase 3 CATALYST study of bardoxolone in patients with connective tissue disease-associated pulmonary arterial hypertension (CTD-PAH).
Reata 2019 Corporate Highlights
Reacquired the development, manufacturing, and commercialization rights concerning our proprietary Nrf2 activator product platform, including bardoxolone and omaveloxolone, originally licensed to AbbVie, Inc. (AbbVie) for territories outside of the United States and excluding, for bardoxolone, certain Asian countries previously licensed to Kyowa Kirin Co., Ltd. (KKC).
Completed an underwritten public offering of 2,760,000 shares of Class A common stock at a price to the public of $183.00 per share, resulting in gross proceeds of $505 million.
Fourth Quarter Financial Highlights
Cash and Cash Equivalents
At December 31, 2019, we had cash and cash equivalents of $664.3 million, as compared to $337.8 million at December 31, 2018.
GAAP and Non-GAAP Net Loss
The net loss according to generally accepted accounting principles in the U.S. (GAAP) for the fourth quarter of 2019 was $186.9 million, or $5.91 per share, on both a basic and diluted basis, as compared to a GAAP net loss of $25.6 million, $0.86 per share, on both a basic and diluted basis, for the same period of the year prior. For the twelve months ended December 31, 2019, the GAAP net loss was $290.2 million, or $9.54 per share, on both a basic and diluted basis, as compared to a GAAP net loss of $80.5 million, or $2.91 per share, on both a basic and diluted basis, for the same period of the year prior.
The increase in GAAP net loss is driven primarily by a Reacquired license right expense of $124.4 million related to the amended and restated license agreement we entered into with AbbVie in October 2019 (Reacquisition Agreement) to reacquire the development, manufacturing, and commercialization rights concerning our proprietary Nrf2 activator product platform, as well as increases in stock based compensation expense related to the growth of our personnel.
The non-GAAP net loss for the fourth quarter of 2019 was $50.3 million, or $1.59 per share on both a basic and diluted basis, as compared to a non-GAAP net loss of $22.8 million, $0.77 per share, on both a basic and diluted basis, for the same period of the year prior. For the twelve months ended December 31, 2019, the non-GAAP net loss was $139.4 million, or $4.58 per share, on both a basic and diluted basis, as compared to a non-GAAP net loss of $70.0 million, or $2.53 per share, on both a basic and diluted basis, for the same period of the year prior.
The non-GAAP net loss excludes stock-based compensation and reacquired license rights expense. See "Use of Non-GAAP Financial Measures" below for a description of non-GAAP financial measures and a reconciliation between GAAP and non-GAAP net loss appearing later in the press release.
Revenue
Revenue was $2.7 million in the fourth quarter of 2019, as compared $8.5 million for the same period of the year prior. Revenue for the fourth quarter of 2019 included $0.7 million from the AbbVie collaboration agreement, $1.2 million from the KKC license agreement, and $0.8 million from other sources. Revenue was $26.5 million for the twelve months ended December 31, 2019, as compared to $53.6 million, for the same period of the year prior. Revenue for the twelve months ended December 31, 2019 included $20.6 million from the AbbVie collaboration agreement, $4.7 million from the KKC license agreement, and $1.2 million from other sources.
GAAP and Non-GAAP Research and Development (R&D) Expenses
GAAP R&D expenses were $40.2 million for the fourth quarter of 2019, as compared to $25.3 million, for the same period of the year prior. GAAP R&D expenses were $128.1 million for the twelve months ended December 31, 2019, as compared to $97.3 million, for the same period of the year prior.
Non-GAAP R&D expenses were $36.7 million for the fourth quarter of 2019, as compared to $24.3 million, for the same period of the year prior. Non-GAAP R&D expenses were $119.4 million for the twelve months ended December 31, 2019, as compared to $93.3 million, for the same period of the year prior.
The non-GAAP R&D expenses exclude stock-based compensation expense. See "Use of Non-GAAP Financial Measures" below for a description of non-GAAP financial measures and a reconciliation between GAAP and non-GAAP R&D expenses appearing later in the press release.
GAAP and Non-GAAP General and Administrative (G&A) Expenses
GAAP G&A expenses were $22.3 million for the fourth quarter of 2019, as compared to $7.9 million, for the same period of the year prior. GAAP G&A expenses were $58.3 million for the twelve months ended December 31, 2019, as compared to $32.7 million, for the same period of the year prior.
Non-GAAP G&A expenses were $13.4 million for the fourth quarter of 2019, as compared to $6.2 million, for the same period of the year prior. Non-GAAP G&A expenses were $40.6 million for the twelve months ended December 31, 2019, as compared to $26.1 million, for the same period of the year prior.
The non-GAAP G&A expenses excludes stock-based compensation expense. See "Use of Non-GAAP Financial Measures" below for a description of non-GAAP financial measures and a reconciliation between GAAP and non-GAAP G&A expenses appearing later in the press release.
Operating Capital Requirements
We believe our existing cash and cash equivalents will be sufficient to enable us to fund our operations through the end of 2021.
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures, including non-GAAP R&D expenses, non-GAAP G&A expenses, non-GAAP operating expenses, non-GAAP net loss and non-GAAP net loss per common share – basic and diluted. These measures are not in accordance with, or an alternative to, GAAP, and may be different from non-GAAP financial measures used by other companies.
The Company defines non-GAAP R&D expenses as GAAP R&D expenses less stock-based compensation expense, non-GAAP G&A expenses as GAAP G&A expenses less stock-based compensation expense, non-GAAP operating expenses as GAAP operating expenses less stock-based compensation expense and reacquired license rights expense, non-GAAP net loss as GAAP net loss plus stock-based compensation expense and reacquired license rights expense and non-GAAP net loss per common share – basic and diluted as GAAP net loss per common share – basic and diluted plus stock-based compensation expense and reacquired license rights expense. The Company has excluded the impact of stock-based compensation expense, which may fluctuate from period to period based on factors including the variability associated with performance-based grants for stock options and restricted stock units and changes in the Company’s stock price, which impacts the fair value of these awards. The Company has excluded the impact of reacquired license rights expense because the Company believes its impact makes it difficult to compare its results to prior periods and anticipated future periods.
Because management believes certain items such as stock-based compensation expense and reacquired license rights expense can distort the trends associated with the Company’s ongoing performance, the following measures are often provided, excluding special items, and utilized by the Company’s management, analysts, and investors to enhance consistency and comparability of year-over-year results, as well as to industry trends, and to provide a basis for evaluating operating results in future periods: non-GAAP net loss; non-GAAP net loss per common share – basic and diluted; non-GAAP R&D expenses; non-GAAP G&A expenses; and non-GAAP operating expenses.
The Company believes the presentation of these non-GAAP financial measures provides useful information to management and investors regarding the Company’s financial condition and results of operations. When GAAP financial measures are viewed in conjunction with these non-GAAP financial measures, investors are provided with a more meaningful understanding of the Company’s ongoing operating performance and are better able to compare the Company’s performance between periods. In addition, these non-GAAP financial measures are among those indicators the Company uses as a basis for evaluating performance, allocating resources and planning and forecasting future periods. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for GAAP financial measures. A reconciliation between these non-GAAP measures and the most directly comparable GAAP measures is provided later in this press release.