On May 11, 2020 Reata Pharmaceuticals, Inc. (Nasdaq: RETA) ("Reata," the "Company," or "we"), a clinical-stage biopharmaceutical company, reported financial results for the quarter ended March 31, 2020, and provided an update on the Company’s business and product development programs (Press release, Reata Pharmaceuticals, MAY 11, 2020, View Source [SID1234557609]).
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Recent Company Highlights
Reata recently announced changes to its clinical programs and operations as a result of the COVID-19 pandemic. For each clinical development program, Reata developed and implemented changes designed to mitigate risk to patients; comply with regulatory, institutional, and government guidance; and maintain the integrity of our ongoing clinical studies. At this time, we expect that data collection for the ongoing CARDINAL study of bardoxolone methyl (bardoxolone) in chronic kidney disease caused by Alport syndrome will not be significantly impacted by the COVID-19 pandemic. We have observed no significant data loss during this period.
When the FALCON trial for bardoxolone in ADPKD was paused in March, we implemented adjustments similar to those implemented for CARDINAL. We have observed no significant data loss in the FALCON trial to date. For the FALCON study, we have been able to continue treatment of patients enrolled in the study, but because in-clinic visits are necessary to enroll new patients, we have had to pause enrollment of new patients into the study. Clinical trial sites are starting to reopen, and we are hopeful that we may be able to resume screening of patients for FALCON as early as this quarter at some sites.
Additionally, we do not believe that the COVID-19 pandemic will have a significant impact on our ability to execute on the planned New Drug Application submissions for bardoxolone in Alport syndrome or omaveloxolone in Friedreich’s ataxia.
First Quarter Financial Highlights
Cash and Cash Equivalents
On March 31, 2020, we had cash and cash equivalents of $624.5 million, as compared to $664.3 million at December 31, 2019.
Collaboration Revenue
Collaboration Revenue was $1.4 million in the first quarter of 2020, as compared to $7.8 million for the same period of the year prior. Revenue for the first quarter of 2020 included $1.2 million from the Kyowa Kirin Co., Ltd. license agreement and $0.2 million from other sources.
GAAP and Non-GAAP Research and Development (R&D) Expenses
R&D expenses according to generally accepted accounting principles in the U.S. (GAAP) were $47.7 million for the first quarter of 2020, as compared to $26.1 million for the same period of the year prior.
Non-GAAP R&D expenses were $36.1 million for the first quarter of 2020, as compared to $24.4 million for the same period of the year prior.1
GAAP and Non-GAAP General and Administrative (G&A) Expenses
GAAP G&A expenses were $20.8 million for the first quarter of 2020, as compared to $10.0 million for the same period of the year prior.
Non-GAAP G&A expenses were $13.0 million for the first quarter of 2020, as compared to $7.5 million for the same period of the year prior.1
GAAP and Non-GAAP Net Loss
The GAAP net loss for the first quarter of 2020 was $48.9 million, or $1.47 per share, on both a basic and diluted basis, as compared to a GAAP net loss of $29.2 million, or $0.98 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 an increase in expenses, offset by an income tax benefit. Higher expenses were driven by an increase in research and development activities, including personnel-related costs to support this growth. Under the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), we recognized a tax benefit of $22.1 million.
The non-GAAP net loss for the first quarter of 2020 was $29.6 million, or $0.89 per share on both a basic and diluted basis, as compared to a non-GAAP net loss of $24.9 million, or $0.84 per share, on both a basic and diluted basis, for the same period of the year prior.1
Reiterates Cash Guidance
The Company reiterated that it expects existing cash and cash equivalents to be sufficient to enable it to fund operations through the end of 2021.
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1 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, GAAP and non-GAAP G&A expenses, and GAAP and non-GAAP net loss, respectively, appearing later in the press release.
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. During the three months ended March 31, 2020 and 2019, the Company did not incur any reacquired license rights expense; therefore, this expense is not included in the reconciliations below for the measures for non-GAAP operating expenses, non-GAAP net loss, and non-GAAP net loss per common share – basic and diluted for these periods. 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.
Conference Call Information
Reata’s management will host a conference call on May 11, 2020 at 4:30 PM ET. The conference call will be accessible by dialing (844) 348-3946 or (213) 358-0892 (international) using the access code: 6936548. The webcast link is View Source
First quarter 2020 financial results to be discussed during the call will be included in an earnings press release that will be available on the company’s website shortly before the call at View Source and will be available for 12 months after the call. The audio recording and webcast will be accessible for at least 90 days after the event at View Source.