UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 20192020
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-37785
Reata Pharmaceuticals, Inc.
(Exact Name of Registrant as Specified in its Charter)
|
| 11-3651945 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer |
|
|
|
|
|
|
(Address of principal executive offices) |
| (Zip Code) |
(972) 865-2219
(Registrant’s telephone number, including area code: (972) 865-2219code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
Class A Common Stock, Par Value $0.001 Per Share |
| RETA |
| NASDAQ Global Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, an emerging growth company, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
|
|
| Accelerated filer |
|
|
Non-accelerated filer |
| ☐ |
| Smaller reporting company |
| ☐ |
Emerging growth company |
|
|
|
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 5, 2019,2020, the registrant had 24,481,66328,559,247 shares of Class A common stock, $0.001 par value per share, and 5,624,6815,045,092 shares of Class B common stock, $0.001 par value per share, outstanding.
TABLE OF CONTENTS
|
| Page |
1 | ||
3 | ||
PART I. |
| |
Item 1. | 4 | |
| 4 | |
| 5 | |
| 6 | |
| 7 | |
| 8 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
Item 3. |
| |
Item 4. |
| |
PART II. |
| |
Item 1. |
| |
Item 1A. |
| |
Item 2. |
| |
Item 3. |
| |
Item 4. |
| |
Item 5. |
| |
Item 6. |
| |
| ||
|
|
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. AllIn this Quarterly Report on Form 10-Q, all statements, other than statements of historical or present facts, including statements regarding our future financial condition, future revenues, projected costs, prospects, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “believe,” “will,” “may,” “might,” “estimate,” “continue,” “anticipate,” “intend,” “target,” “project,” “model,” “should,” “would,” “plan,” “expect,” “predict,” “could,” “seek,” “goals,” “potential,” and similar terms or expressions that concern our expectations, strategy, plans, or intentions. These forward-looking statements include, but are not limited to, statements about:
| • | our expectations regarding the timing, costs, conduct, and outcome of our clinical trials, including statements regarding the timing of the initiation and availability of data from such trials; |
| • | the timing and likelihood of regulatory filings and approvals for our product candidates; |
• | whether regulatory authorities determine that additional trials or data are necessary in order to accept a new drug application for review and/or approval; |
| • | our ability to obtain funding for our operations, including funding necessary to complete further development and commercialization of our product candidates; |
| • | our plans to research, develop, and commercialize our product candidates; |
| • | the commercialization of our product candidates, if approved; |
| • | the rate and degree of market acceptance of our product candidates; |
| • | our expectations regarding the potential market size and the size of the patient populations for our product candidates, if approved for commercial use, and the potential market opportunities for commercializing our product candidates; |
| • | the success of competing therapies that are or may become available; |
| • | our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates; |
| • |
|
| • | our ability to maintain and establish relationships with third parties, such as contract research organizations, suppliers, and distributors; |
| • | our ability to maintain and establish collaborators with development, regulatory, and commercialization expertise; |
| • | our ability to attract and retain key scientific or management personnel; |
| • | our ability to grow our organization and increase the size of our facilities to meet our anticipated growth; |
| • | the accuracy of our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing; |
| • | our expectations |
|
|
| • | our ability to develop, acquire, and advance product candidates into, and successfully complete, clinical trials; |
| • | the initiation, timing, progress, and results of future preclinical studies and clinical trials, and our research and development programs; |
1
| • | the impact of governmental laws and regulations and regulatory developments in the United States and foreign countries; |
| • | developments and projections relating to our competitors and our industry; |
• | the impact of the coronavirus disease (COVID-19) on our clinical trials, our supply chain, and our operations; and |
| • | other risks and uncertainties, including those described under the heading “Risk Factors” included in our most recent Annual Report on Form 10-K for the year ended December 31, |
Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those described under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018 and in this Quarterly Report on Form 10-Q under “Part II, Item 1A. Risk Factors.” Given these uncertainties, you should not place undue reliance on these forward-looking statements.
You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
2
DEFINED TERMS
Unless the context requires otherwise, references to “Reata,” “the Company,” “we,” “us,” or “our” in this Quarterly Report on Form 10-Q refer to Reata Pharmaceuticals, Inc. and its subsidiaries. We also have used several other terms in this Quarterly Report on Form 10-Q, most of which are explained or defined below.
Abbreviated Term |
| Defined Term |
|
| |
AbbVie |
| AbbVie Inc. |
ADPKD |
| Autosomal dominant polycystic kidney disease |
|
| |
ASU |
| Accounting Standards Update |
|
| Bardoxolone methyl |
|
|
|
CARES Act | Coronavirus Aid, Relief, and Economic Security Act | |
CKD |
| Chronic kidney disease |
COVID-19 | Coronavirus disease | |
CRO |
| Contract research organization |
|
| |
|
| |
|
| |
eGFR |
| Estimated glomerular filtration rate |
ESKD |
| End stage kidney disease |
Exchange Act |
| Securities Exchange Act of 1934 |
FA |
| Friedreich’s ataxia |
FARA | Friedreich’s Ataxia Research Alliance | |
FASB |
| Financial Accounting Standards Board |
FDA |
| United States Food and Drug Administration |
FSGS |
| Focal segmental glomerulosclerosis |
GFR |
| Glomerular filtration rate |
IgAN |
| IgA nephropathy |
|
|
|
|
| |
|
| |
|
| |
KKC |
| Kyowa Kirin Co., Ltd. |
mFARS |
| Modified Friedreich’s Ataxia Rating Scale |
NDA |
| New Drug Application |
|
|
|
|
|
|
|
|
approval of |
|
| |
|
| |
Sarbanes-Oxley Act |
| The Sarbanes-Oxley Act of 2002 |
SEC |
| U.S. Securities and Exchange Commission |
T1D CKD |
| Type 1 diabetic CKD |
T2D CKD |
| Type 2 diabetic CKD |
|
|
3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Reata Pharmaceuticals, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
|
| June 30, 2019 |
|
| December 31, 2018 |
|
| June 30, 2020 |
|
| December 31, 2019 |
| ||||
|
| (unaudited) |
|
|
|
|
|
| (unaudited) |
|
|
|
|
| ||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 280,449 |
|
| $ | 337,790 |
|
| $ | 610,419 |
|
| $ | 664,324 |
|
Prepaid expenses and other current assets |
|
| 6,762 |
|
|
| 4,483 |
|
|
| 7,830 |
|
|
| 4,952 |
|
Income tax receivable |
|
| 22,218 |
|
|
| — |
| ||||||||
Total current assets |
|
| 287,211 |
|
|
| 342,273 |
|
|
| 640,467 |
|
|
| 669,276 |
|
Property and equipment, net |
|
| 2,814 |
|
|
| 1,445 |
|
|
| 4,267 |
|
|
| 2,996 |
|
Other assets |
|
| 10,463 |
|
|
| 1,490 |
|
|
| 7,670 |
|
|
| 10,148 |
|
Total assets |
| $ | 300,488 |
|
| $ | 345,208 |
|
| $ | 652,404 |
|
| $ | 682,420 |
|
Liabilities and stockholders’ (deficit) equity |
|
|
|
|
|
|
|
| ||||||||
Liabilities and stockholders’ equity |
|
|
|
|
|
|
|
| ||||||||
Accounts payable |
|
| 4,361 |
|
|
| 4,473 |
|
|
| 11,263 |
|
|
| 1,908 |
|
Accrued direct research liabilities |
|
| 20,871 |
|
|
| 15,416 |
|
|
| 16,689 |
|
|
| 23,774 |
|
Other current liabilities |
|
| 11,056 |
|
|
| 4,696 |
|
|
| 14,545 |
|
|
| 11,631 |
|
Current portion of payable to collaborators |
|
| — |
|
|
| 150,000 |
| ||||||||
Current portion of deferred revenue |
|
| 31,421 |
|
|
| 31,335 |
|
|
| 4,688 |
|
|
| 4,701 |
|
Total current liabilities |
|
| 67,709 |
|
|
| 55,920 |
|
|
| 47,185 |
|
|
| 192,014 |
|
Other long-term liabilities |
|
| 7,594 |
|
|
| 524 |
|
|
| 6,940 |
|
|
| 6,982 |
|
Term loan, net of current portion and debt issuance costs |
|
| 79,897 |
|
|
| 79,219 |
| ||||||||
Term loan, net of debt issuance costs |
|
| — |
|
|
| 155,017 |
| ||||||||
Liability related to sale of future royalties, net |
|
| 294,234 |
|
|
| — |
| ||||||||
Payable to collaborators, net of current portion |
|
| 70,055 |
|
|
| 66,862 |
| ||||||||
Deferred revenue, net of current portion |
|
| 178,761 |
|
|
| 194,386 |
|
|
| 2,363 |
|
|
| 4,688 |
|
Total noncurrent liabilities |
|
| 266,252 |
|
|
| 274,129 |
|
|
| 373,592 |
|
|
| 233,549 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ (deficit) equity: |
|
|
|
|
|
|
|
| ||||||||
Common stock A, $0.001 par value: 500,000,000 shares authorized; issued and outstanding – 24,466,407 and 24,000,683 shares at June 30, 2019 and December 31, 2018 |
|
| 24 |
|
|
| 24 |
| ||||||||
Common stock B, $0.001 par value: 150,000,000 shares authorized; issued and outstanding – 5,631,527 and 5,728,175 shares at June 30, 2019 and December 31, 2018 |
|
| 6 |
|
|
| 6 |
| ||||||||
Stockholders’ equity: |
|
|
|
|
|
|
|
| ||||||||
Common stock A, $0.001 par value: 500,000,000 shares authorized; issued and outstanding – 28,526,532 and 27,878,550 at June 30, 2020 and December 31, 2019, respectively |
|
| 29 |
|
|
| 28 |
| ||||||||
Common stock B, $0.001 par value: 150,000,000 shares authorized; issued and outstanding – 5,058,319 and 5,318,157 shares at June 30, 2020 and December 31, 2019, respectively |
|
| 5 |
|
|
| 5 |
| ||||||||
Additional paid-in capital |
|
| 450,354 |
|
|
| 435,452 |
|
|
| 1,058,606 |
|
|
| 967,317 |
|
Accumulated deficit |
|
| (483,857 | ) |
|
| (420,323 | ) |
|
| (827,013 | ) |
|
| (710,493 | ) |
Total stockholders’ (deficit) equity |
|
| (33,473 | ) |
|
| 15,159 |
| ||||||||
Total liabilities and stockholders’ (deficit) equity |
| $ | 300,488 |
|
| $ | 345,208 |
| ||||||||
Total stockholders’ equity |
|
| 231,627 |
|
|
| 256,857 |
| ||||||||
Total liabilities and stockholders’ equity |
| $ | 652,404 |
|
| $ | 682,420 |
|
See accompanying notes.
4
Reata Pharmaceuticals, Inc.
Unaudited Consolidated Statements of Operations
(in thousands, except share and per share data)
|
| Three Months Ended |
|
| Six Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| June 30, |
|
| June 30, |
|
| June 30 |
|
| June 30 |
| ||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
Collaboration revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License and milestone |
| $ | 7,813 |
|
| $ | 7,519 |
|
| $ | 15,539 |
|
| $ | 39,686 |
|
| $ | 1,169 |
|
| $ | 7,813 |
|
| $ | 2,338 |
|
| $ | 15,539 |
|
Other revenue |
|
| 20 |
|
|
| 52 |
|
|
| 64 |
|
|
| 276 |
|
|
| 1,904 |
|
|
| 20 |
|
|
| 2,088 |
|
|
| 64 |
|
Total collaboration revenue |
|
| 7,833 |
|
|
| 7,571 |
|
|
| 15,603 |
|
|
| 39,962 |
|
|
| 3,073 |
|
|
| 7,833 |
|
|
| 4,426 |
|
|
| 15,603 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
| 29,554 |
|
|
| 23,429 |
|
|
| 55,668 |
|
|
| 44,835 |
|
|
| 36,783 |
|
|
| 29,554 |
|
|
| 84,436 |
|
|
| 55,668 |
|
General and administrative |
|
| 11,706 |
|
|
| 10,689 |
|
|
| 21,744 |
|
|
| 17,317 |
|
|
| 16,600 |
|
|
| 11,706 |
|
|
| 37,387 |
|
|
| 21,744 |
|
Depreciation |
|
| 232 |
|
|
| 105 |
|
|
| 401 |
|
|
| 206 |
|
|
| 284 |
|
|
| 232 |
|
|
| 562 |
|
|
| 401 |
|
Total expenses |
|
| 41,492 |
|
|
| 34,223 |
|
|
| 77,813 |
|
|
| 62,358 |
|
|
| 53,667 |
|
|
| 41,492 |
|
|
| 122,385 |
|
|
| 77,813 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment income |
|
| 1,705 |
|
|
| 357 |
|
|
| 3,502 |
|
|
| 693 |
| ||||||||||||||||
Interest expense |
|
| (2,413 | ) |
|
| (903 | ) |
|
| (4,810 | ) |
|
| (1,413 | ) | ||||||||||||||||
Loss on extinguishment of debt |
|
| — |
|
|
| (1,007 | ) |
|
| — |
|
|
| (1,007 | ) | ||||||||||||||||
Other income (expense) |
|
| 7 |
|
|
| — |
|
|
| 7 |
|
|
| — |
| ||||||||||||||||
Total other income (expense) |
|
| (701 | ) |
|
| (1,553 | ) |
|
| (1,301 | ) |
|
| (1,727 | ) | ||||||||||||||||
Other income (expense), net |
|
| (16,990 | ) |
|
| (701 | ) |
|
| (20,804 | ) |
|
| (1,301 | ) | ||||||||||||||||
Loss before taxes on income |
|
| (34,360 | ) |
|
| (28,205 | ) |
|
| (63,511 | ) |
|
| (24,123 | ) |
|
| (67,584 | ) |
|
| (34,360 | ) |
|
| (138,763 | ) |
|
| (63,511 | ) |
Provision for taxes on income |
|
| 20 |
|
|
| 6 |
|
|
| 23 |
|
|
| 6 |
| ||||||||||||||||
(Benefit from) provision for taxes on income |
|
| (3 | ) |
|
| 20 |
|
|
| (22,243 | ) |
|
| 23 |
| ||||||||||||||||
Net loss |
| $ | (34,380 | ) |
| $ | (28,211 | ) |
| $ | (63,534 | ) |
| $ | (24,129 | ) |
| $ | (67,581 | ) |
| $ | (34,380 | ) |
| $ | (116,520 | ) |
| $ | (63,534 | ) |
Net loss per share—basic and diluted |
| $ | (1.14 | ) |
| $ | (1.08 | ) |
| $ | (2.12 | ) |
| $ | (0.92 | ) |
| $ | (2.03 | ) |
| $ | (1.14 | ) |
| $ | (3.51 | ) |
| $ | (2.12 | ) |
Weighted-average number of common shares used in net loss per share basic and diluted |
|
| 30,069,048 |
|
|
| 26,178,793 |
|
|
| 29,950,241 |
|
|
| 26,167,033 |
|
|
| 33,265,778 |
|
|
| 30,069,048 |
|
|
| 33,243,931 |
|
|
| 29,950,241 |
|
See accompanying notes.
5
Reata Pharmaceuticals, Inc.
Unaudited Consolidated Statements of Stockholders’ Equity (Deficit) Equity
(in thousands, except share and per share data)
|
| Three Months Ended June 30, 2018 |
|
| Three Months Ended June 30, 2020 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Common Stock A |
|
| Common Stock B |
|
| Additional Paid-In |
|
| Shareholder Notes |
|
| Total Accumulated |
|
| Total Stockholders’ |
|
| Common Stock A |
|
| Common Stock B |
|
| Additional Paid-In |
|
| Total Accumulated |
|
| Total Stockholders’ |
| |||||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Receivable |
|
| Deficit |
|
| (Deficit) Equity |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity |
| |||||||||||||||
Balance at March 31, 2018 |
|
| 19,991,082 |
|
| $ | 20 |
|
|
| 6,171,517 |
|
| $ | 7 |
|
| $ | 192,962 |
|
| $ | (2 | ) |
| $ | (335,688 | ) |
| $ | (142,701 | ) | ||||||||||||||||||||||||||||
Balance at March 31, 2020 |
|
| 28,166,652 |
|
| $ | 28 |
|
|
| 5,070,271 |
|
| $ | 5 |
|
| $ | 988,046 |
|
| $ | (759,432 | ) |
| $ | 228,647 |
| ||||||||||||||||||||||||||||||||
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (28,211 | ) |
|
| (28,211 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (67,581 | ) |
|
| (67,581 | ) |
Compensation expense related to stock options |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,552 |
|
|
| — |
|
|
| (14 | ) |
|
| 2,538 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 14,796 |
|
|
| — |
|
|
| 14,796 |
|
Exercise of options |
|
| — |
|
|
| — |
|
|
| 43,259 |
|
|
| (1 | ) |
|
| 493 |
|
|
| — |
|
|
| — |
|
|
| 492 |
|
|
| — |
|
|
| — |
|
|
| 7,135 |
|
|
| — |
|
|
| 365 |
|
|
| — |
|
|
| 365 |
|
Proceeds from payments of shareholder promissory notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 6 |
|
|
| 2 |
|
|
|
|
|
|
| 8 |
| ||||||||||||||||||||||||||||
Conversion of common stock Class B to Class A |
|
| 253,593 |
|
|
| — |
|
|
| (253,593 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19,087 |
|
|
| — |
|
|
| (19,087 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Balance at June 30, 2018 |
|
| 20,244,675 |
|
| $ | 20 |
|
|
| 5,961,183 |
|
| $ | 6 |
|
| $ | 196,013 |
|
| $ | — |
|
| $ | (363,913 | ) |
| $ | (167,874 | ) | ||||||||||||||||||||||||||||
Issuance of Common Stock |
|
| 340,793 |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| 55,399 |
|
|
| — |
|
|
| 55,400 |
| ||||||||||||||||||||||||||||||||
Balance at June 30, 2020 |
|
| 28,526,532 |
|
| $ | 29 |
|
|
| 5,058,319 |
|
| $ | 5 |
|
| $ | 1,058,606 |
|
| $ | (827,013 | ) |
| $ | 231,627 |
|
|
| Six Months Ended June 30, 2018 |
|
| Six Months Ended June 30, 2020 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Common Stock A |
|
| Common Stock B |
|
| Additional Paid-In |
|
| Shareholder Notes |
|
| Total Accumulated |
|
| Total Stockholders’ |
|
| Common Stock A |
|
| Common Stock B |
|
| Additional Paid-In |
|
| Total Accumulated |
|
| Total Stockholders’ |
| |||||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Receivable |
|
| Deficit |
|
| (Deficit) Equity |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity |
| |||||||||||||||
Balance at December 31, 2017 |
|
| 19,975,340 |
|
| $ | 20 |
|
|
| 6,166,166 |
|
| $ | 7 |
|
| $ | 190,145 |
|
| $ | (2 | ) |
| $ | (337,143 | ) |
| $ | (146,973 | ) | ||||||||||||||||||||||||||||
Balance at December 31, 2019 |
|
| 27,878,550 |
|
| $ | 28 |
|
|
| 5,318,157 |
|
| $ | 5 |
|
| $ | 967,317 |
|
| $ | (710,493 | ) |
| $ | 256,857 |
| ||||||||||||||||||||||||||||||||
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (24,129 | ) |
|
| (24,129 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| $ | — |
|
|
| (116,520 | ) |
|
| (116,520 | ) |
Compensation expense related to stock options |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,037 |
|
|
| — |
|
|
| (7 | ) |
|
| 5,030 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| $ | 34,104 |
|
|
| — |
|
|
| 34,104 |
|
Exercise of options |
|
| — |
|
|
| — |
|
|
| 64,352 |
|
|
| (1 | ) |
|
| 825 |
|
|
| — |
|
|
| — |
|
|
| 824 |
|
|
| — |
|
|
| — |
|
|
| 47,351 |
|
|
| — |
|
| $ | 1,786 |
|
|
| — |
|
|
| 1,786 |
|
Proceeds from payments of shareholder promissory notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 6 |
|
|
| 2 |
|
|
|
|
|
|
| 8 |
| ||||||||||||||||||||||||||||
Conversion of common stock Class B to Class A |
|
| 269,335 |
|
|
| — |
|
|
| (269,335 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 307,189 |
|
|
| — |
|
|
| (307,189 | ) |
|
| — |
|
| $ | — |
|
|
| — |
|
|
| — |
|
Adoption of new accounting guidance |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,634 | ) |
|
| (2,634 | ) | ||||||||||||||||||||||||||||
Balance at June 30, 2018 |
|
| 20,244,675 |
|
| $ | 20 |
|
|
| 5,961,183 |
|
| $ | 6 |
|
| $ | 196,013 |
|
| $ | — |
|
| $ | (363,913 | ) |
| $ | (167,874 | ) | ||||||||||||||||||||||||||||
Issuance of Common Stock |
|
| 340,793 |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
| $ | 55,399 |
|
|
| — |
|
|
| 55,400 |
| ||||||||||||||||||||||||||||||||
Balance at June 30, 2020 |
|
| 28,526,532 |
|
| $ | 29 |
|
|
| 5,058,319 |
|
| $ | 5 |
|
| $ | 1,058,606 |
|
| $ | (827,013 | ) |
| $ | 231,627 |
|
|
| Three Months Ended June 30, 2019 |
| |||||||||||||||||||||||||
|
| Common Stock A |
|
| Common Stock B |
|
| Additional Paid-In |
|
| Total Accumulated |
|
| Total Stockholders’ |
| |||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| (Deficit) |
| |||||||
Balance at March 31, 2019 |
|
| 24,403,477 |
|
| $ | 24 |
|
|
| 5,639,666 |
|
| $ | 6 |
|
| $ | 444,837 |
|
| $ | (449,477 | ) |
| $ | (4,610 | ) |
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (34,380 | ) |
|
| (34,380 | ) |
Compensation expense related to stock options |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,483 |
|
|
| — |
|
|
| 4,483 |
|
Exercise of options |
|
| — |
|
|
| — |
|
|
| 54,791 |
|
|
| — |
|
|
| 1,034 |
|
|
| — |
|
|
| 1,034 |
|
Conversion of common stock Class B to Class A |
|
| 62,930 |
|
|
| — |
|
|
| (62,930 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Balance at June 30, 2019 |
|
| 24,466,407 |
|
| $ | 24 |
|
|
| 5,631,527 |
|
| $ | 6 |
|
| $ | 450,354 |
|
| $ | (483,857 | ) |
| $ | (33,473 | ) |
|
| Three Months Ended June 30, 2019 |
|
| Six Months Ended June 30, 2019 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Common Stock A |
|
| Common Stock B |
|
| Additional Paid-In |
|
| Shareholder Notes |
|
| Total Accumulated |
|
| Total Stockholders’ |
|
| Common Stock A |
|
| Common Stock B |
|
| Additional Paid-In |
|
| Total Accumulated |
|
| Total Stockholders’ |
| |||||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Receivable |
|
| Deficit |
|
| (Deficit) Equity |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity (Deficit) |
| |||||||||||||||
Balance at March 31, 2019 |
|
| 24,403,477 |
|
| $ | 24 |
|
|
| 5,639,666 |
|
| $ | 6 |
|
| $ | 444,837 |
|
| $ | — |
|
| $ | (449,477 | ) |
| $ | (4,610 | ) | ||||||||||||||||||||||||||||
Balance at December 31, 2018 |
|
| 24,000,683 |
|
| $ | 24 |
|
|
| 5,728,175 |
|
| $ | 6 |
|
| $ | 435,452 |
|
| $ | (420,323 | ) |
| $ | 15,159 |
| ||||||||||||||||||||||||||||||||
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (34,380 | ) |
|
| (34,380 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (63,534 | ) |
|
| (63,534 | ) |
Compensation expense related to stock options |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,483 |
|
|
| — |
|
|
| — |
|
|
| 4,483 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8,710 |
|
|
| — |
|
|
| 8,710 |
|
Exercise of options |
|
| — |
|
|
| — |
|
|
| 54,791 |
|
|
| — |
|
|
| 1,034 |
|
|
| — |
|
|
| — |
|
|
| 1,034 |
|
|
| — |
|
|
| — |
|
|
| 369,076 |
|
|
| — |
|
|
| 6,085 |
|
|
| — |
|
|
| 6,085 |
|
Conversion of common stock Class B to Class A |
|
| 62,930 |
|
|
| — |
|
|
| (62,930 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 465,724 |
|
|
| — |
|
|
| (465,724 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other shareholder transactions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 107 |
|
|
| — |
|
|
| 107 |
| ||||||||||||||||||||||||||||||||
Balance at June 30, 2019 |
|
| 24,466,407 |
|
| $ | 24 |
|
|
| 5,631,527 |
|
| $ | 6 |
|
| $ | 450,354 |
|
| $ | — |
|
| $ | (483,857 | ) |
| $ | (33,473 | ) |
|
| 24,466,407 |
|
| $ | 24 |
|
|
| 5,631,527 |
|
| $ | 6 |
|
| $ | 450,354 |
|
| $ | (483,857 | ) |
| $ | (33,473 | ) |
|
| Six Months Ended June 30, 2019 |
| |||||||||||||||||||||||||||||
|
| Common Stock A |
|
| Common Stock B |
|
| Additional Paid-In |
|
| Shareholder Notes |
|
| Total Accumulated |
|
| Total Stockholders’ |
| ||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Receivable |
|
| Deficit |
|
| (Deficit) Equity |
| ||||||||
Balance at December 31, 2018 |
|
| 24,000,683 |
|
| $ | 24 |
|
|
| 5,728,175 |
|
| $ | 6 |
|
| $ | 435,452 |
|
| $ | — |
|
| $ | (420,323 | ) |
| $ | 15,159 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (63,534 | ) |
|
| (63,534 | ) |
Compensation expense related to stock options |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8,710 |
|
|
| — |
|
|
| — |
|
|
| 8,710 |
|
Exercise of options |
|
| — |
|
|
| — |
|
|
| 369,076 |
|
|
| — |
|
|
| 6,085 |
|
|
| — |
|
|
| — |
|
|
| 6,085 |
|
Conversion of common stock Class B to Class A |
|
| 465,724 |
|
|
| — |
|
|
| (465,724 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other shareholder transactions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 107 |
|
|
| — |
|
|
| — |
|
|
| 107 |
|
Balance at June 30, 2019 |
|
| 24,466,407 |
|
| $ | 24 |
|
|
| 5,631,527 |
|
| $ | 6 |
|
| $ | 450,354 |
|
| $ | — |
|
| $ | (483,857 | ) |
| $ | (33,473 | ) |
See accompanying notes.
6
Reata Pharmaceuticals, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
|
| Six Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30 |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (63,534 | ) |
| $ | (24,129 | ) |
| $ | (116,520 | ) |
| $ | (63,534 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
| 401 |
|
|
| 206 |
|
|
| 562 |
|
|
| 401 |
|
Amortization of debt issuance costs |
|
| 678 |
|
|
| 210 |
| ||||||||
Amortization of debt issuance costs and implied interest |
|
| 4,163 |
|
|
| 678 |
| ||||||||
Non-cash interest expense on liability related to sale of future royalty |
|
| 664 |
|
|
| — |
| ||||||||
Stock-based compensation expense |
|
| 8,710 |
|
|
| 5,037 |
|
|
| 34,104 |
|
|
| 8,710 |
|
Loss on extinguishment of debt |
|
| — |
|
|
| 1,007 |
|
|
| 11,183 |
|
|
| — |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts earned or due from collaboration agreements |
|
| 933 |
|
|
| (29,438 | ) | ||||||||
Prepaid expenses and other current assets |
|
| (3,212 | ) |
|
| (969 | ) | ||||||||
Other assets |
|
| 8 |
|
|
| 13 |
| ||||||||
Income tax receivable |
|
| (22,218 | ) |
|
| — |
| ||||||||
Prepaid expenses and other current assets and other assets |
|
| (1,815 | ) |
|
| (2,271 | ) | ||||||||
Accounts payable |
|
| 312 |
|
|
| 46 |
|
|
| 9,355 |
|
|
| 312 |
|
Accrued direct research and other current and long-term liabilities |
|
| 9,802 |
|
|
| 8,275 |
| ||||||||
Accrued direct research, other current, and long-term liabilities |
|
| (4,247 | ) |
|
| 9,802 |
| ||||||||
Payable to collaborators |
|
| (150,000 | ) |
|
| — |
| ||||||||
Deferred revenue |
|
| (15,539 | ) |
|
| (9,686 | ) |
|
| (2,338 | ) |
|
| (15,539 | ) |
Net cash used in operating activities |
|
| (61,441 | ) |
|
| (49,428 | ) |
|
| (237,107 | ) |
|
| (61,441 | ) |
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
| (2,092 | ) |
|
| (268 | ) |
|
| (384 | ) |
|
| (2,092 | ) |
Net cash used in investing activities |
|
| (2,092 | ) |
|
| (268 | ) |
|
| (384 | ) |
|
| (2,092 | ) |
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt |
|
| — |
|
|
| 60,000 |
| ||||||||
Payments on deferred issuance costs |
|
| — |
|
|
| (2,240 | ) | ||||||||
Proceeds from issuance of common stock, net |
|
| 55,399 |
|
|
| — |
| ||||||||
Payments on long-term debt |
|
| (167,170 | ) |
|
| — |
| ||||||||
Exercise of options |
|
| 6,085 |
|
|
| 832 |
|
|
| 1,786 |
|
|
| 6,085 |
|
Other shareholder transactions |
|
| 107 |
|
|
| — |
| ||||||||
Proceeds from sale of future royalties, net |
|
| 293,571 |
|
|
| 107 |
| ||||||||
Net cash provided by financing activities |
|
| 6,192 |
|
|
| 58,592 |
|
|
| 183,586 |
|
|
| 6,192 |
|
Net (decrease) increase in cash and cash equivalents |
|
| (57,341 | ) |
|
| 8,896 |
| ||||||||
Net decrease in cash and cash equivalents |
|
| (53,905 | ) |
|
| (57,341 | ) | ||||||||
Cash and cash equivalents at beginning of year |
|
| 337,790 |
|
|
| 129,780 |
|
|
| 664,324 |
|
|
| 337,790 |
|
Cash and cash equivalents at end of period |
| $ | 280,449 |
|
| $ | 138,676 |
|
| $ | 610,419 |
|
| $ | 280,449 |
|
Supplemental disclosures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 4,153 |
|
| $ | 1,354 |
|
| $ | 8,021 |
|
| $ | 4,153 |
|
Purchases of equipment in accounts payable and other current liabilities |
| $ | 170 |
|
| $ | 41 |
| ||||||||
Non-cash activity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Right-of-use assets obtained in exchange for lease obligations |
| $ | 8,981 |
|
| $ | — |
|
| $ | — |
|
| $ | 8,981 |
|
Purchases of equipment in accounts payable, accrued direct research, other current, and long-term liabilities |
| $ | 1,448 |
|
| $ | 170 |
|
See accompanying notes.
7
Reata Pharmaceuticals, Inc.
Notes to Unaudited Consolidated Financial Statements
1. Description of Business
The Company’s mission is to identify, develop, and commercialize innovative therapies that change patients’ lives for the better. The Company focuses on developing small-molecule therapeutics with novel mechanisms of action for the treatment of severe, life-threatening diseases with few or no approved therapies. The Company’s lead programs are in rare forms of chronic kidney disease (CKD) and a rare neurological disease. The Company announced positive topline data from registrational trials for both of its lead product candidates, bardoxolone methyl (Bard)(bardoxolone) in patients with CKD caused by Alport syndrome, and omaveloxolone (Omav),in patients with a neurological disorder called Friedreich’s ataxia (FA). Both bardoxolone and omaveloxolone activate the transcription factor Nrf2 which plays an important role in regulating the cellular response to injury. By activating Nrf2, Bard and Omav normalize mitochondrial function, restore redox balance, and resolve inflammation. The Company has fully enrolled two registrational clinical trials: CARDINAL, studying Bard in chronic kidney disease (CKD) caused by Alport syndrome,Because mitochondrial dysfunction, oxidative stress, and MOXIe, studying Omav in Friedreich’s ataxia (FA). CKD caused by Alport syndrome and FAinflammation are rare, seriousfeatures of many diseases, with no approved therapy. The Company designed CARDINAL and MOXIe based on the results of earlier clinical studies and guidance from the FDA on a potential path to approval. The Company expects to have top-line data from both of these clinical trials in the second half of 2019. With each of these indications, FDA approval may provide expansion opportunities into other related indications. The Company is also conducting two additional registrational trials, CATALYST, to study Bard in patients with a rare and serious form of pulmonary arterial hypertension caused by connective tissue disease (CTD-PAH) and FALCON, to study Bard in patients with autosomal dominant polycystic kidney disease (ADPKD). The Company expects to have top-line data from CATALYST during the first half of 2020 and initiated enrollment in FALCON in May 2019. The Company expects its current cash to fund its operations through data readouts for CARDINAL, MOXIe, and CATALYST. In addition to its lead programs, the Company is currently exploring a battery of additionalbelieves bardoxolone and omaveloxolone have many potential clinical applications. Reata possesses exclusive, worldwide rights to develop, manufacture and preclinical programscommercialize bardoxolone, omaveloxolone, and our next-generation Nrf2 activators, excluding certain Asian markets for bardoxolone in diseases that may include meaningful expansion opportunities for Bard and Omav.certain indications, which are licensed to Kyowa Kirin Co., Ltd. (KKC).
The Company’s consolidated financial statements include the accounts of all majority-owned subsidiaries. Accordingly, the Company’s share of net earnings and losses from these subsidiaries is included in the consolidated statements of operations. Intercompany profits, transactions, and balances have been eliminated in consolidation.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 20192020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.2020. The consolidated balance sheet at December 31, 2018,2019, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the annual consolidated financial statements and footnotes thereto of the Company.
Summary of Significant Accounting Policies
The Company’s significant accounting policies used in preparation of these condensed consolidated financial statements for the three and six months ended June 30, 2020 are describedconsistent with those discussed in Note 2 of Notes to Consolidated Financial Statements includedthe consolidated financial statements in itsthe Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (2018 Annual2019, except as noted below with respect to the Company’s liability related to sale of future royalties and as noted within the “Recent Accounting Pronouncements – Recently Adopted Accounting Pronouncements” section.
Liability Related to Sale of Future Royalties
On June 10, 2020, the Company entered into a Development and Commercialization Funding Agreement with an affiliate of Blackstone Life Sciences, LLC (BXLS) that provides funding for the development and commercialization of bardoxolone for the treatment of CKD caused by Alport syndrome, autosomal dominant polycystic kidney disease (ADPKD), and certain other rare CKD indications in return for future royalties (Development Agreement). The Company accounted for the Development Agreement as a sale of future revenues resulting in a debt classification, primarily because the Company has significant continuing involvement in generating the future revenue on which the royalties are based. The debt will be amortized under the effective interest rate method and, accordingly, the Company is recognizing non-cash interest expense over the estimated term of the Development Agreement. The liability related to sale of future royalties, and the debt amortization, are based
on the Company’s current estimate of future royalties expected to be paid over the estimated term of the Development Agreement. The Company will periodically assess the expected royalty payments and, if materially different than its previous estimate, will prospectively adjust and recognize the related non-cash interest expense. The transaction costs associated with the liability will be amortized to non-cash interest expense over the estimated term of the Development Agreement. See Note 5, Liability Related to Sale of Future Royalties, of Notes to Consolidated Financial Statements contained in this Quarterly Report on Form 10-K). During10-Q.
Fair Value Measurements
The Company categorizes its financial instruments measured at fair value into a three-level fair value hierarchy that prioritizes the first quarter of 2019,inputs used in determining the Company adopted Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). As a resultfair value of the adoptionasset or liability. The three levels of Topic 842, the fair value hierarchy are as follows:
• | Level 1 - Financial instruments that have values based on unadjusted quoted prices for identical assets or liabilities in an active market which the Company has the ability to access at the measurement date |
• | Level 2 - Financial instruments that have values based on quoted market prices in markets where trading occurs infrequently or that have values based on quoted prices of instruments with similar attributes in active markets. |
• | Level 3 - Financial instruments that have values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset. |
The Company has updated its Leases accounting policies. There were no other changesdetermined the fair value of the liability related to its significant accounting policies from those disclosedthe sale of future royalties is based on the Company’s current estimates of future royalties expected to be paid to BXLS, over the life of the arrangement, which are considered Level 3. See Note 5, Liability Related to Sale of Future Royalties, of Notes to Consolidated Financial Statements contained in its 2018 Annualthis Quarterly Report on Form 10-K.
Leases
At the inception of an arrangement, the Company determines if an arrangement is, or contains, a lease based on the unique facts and circumstances present in that arrangement. Lease assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are initially recognized at the lease commencement date based on
8
the present value of lease payments over the lease term calculated using its incremental borrowing rate based on the information available at commencement unless the implicit rate is readily determinable. Lease assets also include upfront lease payments, lease incentives paid, and direct costs incurred and exclude lease incentives received. The lease term used to calculate the lease assets and related lease liabilities includes the options to extend or terminate the lease when it is reasonably certain that the Company will exercise those options. Lease expense for operating leases is recognized on a straight-line basis over the expected lease term as an operating expense while the expense for finance leases is recognized as depreciation expense over the expected lease term unless there is a transfer of title or purchase option reasonably certain of exercise.
The Company will account for each separate lease component separately from the nonlease components. The depreciable life of lease assets and leasehold improvements is limited by the expected lease term unless there is a transfer of title or purchase option reasonably certain of its exercise.
Leases with an initial term of 12 months or less are not recorded on the balance sheet, and the expenses for these short-term leases and operating leases are recognized on a straight-line basis over the lease term.10-Q.
Recently Adopted Accounting Pronouncements
The Company is an “emerging growth company,” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has irrevocably elected not to avail itself of this exemption from new or revised accounting standards, and, therefore, will be subject to the same new or revised accounting standards as public companies that are not emerging growth companies.
In February 2016, the Financial Accounting Standards Board (FASB) issued Topic 842, amended by ASU 2018-11, Leases (Topic 842): Targeted Improvements.Improvements. The new guidance requires a lessee to recognize assets and liabilities for all leases with lease terms of more than 12 months and provide additional disclosures. Topic 842 requires adoption using a modified retrospective transition approach with either 1) transition provisions at the beginning of the earliest comparative period recordswith its cumulative adjustment recognized to retained earnings at the beginning of the earliest period presented or 2) a cumulative-effect adjustment recognized to the opening balance of retained earnings on the adoption. We adopted this standard on January 1, 2019, using the cumulative-effect adjustment approach. We elected the package of practical expedients in transition for leases that commenced prior to January 1, 2019 whereby these contracts were not reassessed or reclassified from their previous assessment as of December 31, 2018.
As a result of implementing Topic 842, the Company recognized an operating lease right-of-use asset of $1,544,000 and an operating lease liability of $1,659,000 on January 1, 2019, with no impact on its beginning retained earnings, consolidated statements of operations, or cash flows. See Note 5, Leases, for further details.
In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements (ASU 2018-09). This ASU provided various minor codification updates and improvements to address comments that the FASB had received regarding unclear or vague accounting guidance. The guidance is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within that fiscal year. The adoption of this guidance did not have a material impact on our financial position, results of operations or disclosures.
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements(Topic (Topic 808) (ASU 2018-18). This update provides clarification on the interaction between Revenue Recognitionfrom Contracts with Customers (Topic 606) and Collaborative Arrangements (Topic 808) including the alignment of unit of account guidance between the two topics. This update is effective in fiscal years, including interim periods, beginning after December 15, 2020,2019, and early adoption is permitted. The Company is currently evaluating theadopted this standard on January 1, 2020 and its adoption did not have a material impact on itsthe Company’s consolidated financial statements and related disclosure.
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This update requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to defer and recognize as an asset. This guidance should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoptingadoption. The Company adopted this guidance.standard on January 1, 2020 and its adoption did not have material impact to the Company’s consolidated financial statements and related disclosure.
3. Collaboration Agreements
AbbVie
In September 2010, the Company entered into a license agreement with AbbVie Inc. (AbbVie) (the AbbVie License Agreement) for an exclusive license to develop and commercialize bardoxolone in the Licensee Territory (as defined in the AbbVie License Agreement).
In December 2011, the Company entered into a collaboration agreement with AbbVie Inc. (AbbVie) (the AbbVie Collaboration Agreement) to jointly research, develop, and commercialize the Company’s portfolio of second and later generation oral Nrf2 activators. The terms of the agreement include payment to
On October 9, 2019, the Company of a
9
nonrefundable, up-front payment of $400,000,000. Theand AbbVie entered into an Amended and Restated License Agreement (the Reacquisition Agreement) pursuant to which the Company is also participating with AbbVie on joint steering committees.
The up-front payment andreacquired the Company’s collaboration on research, development, manufacturing, and commercialization are accounted for as a single unit of accounting. Revenue is being recognized ratably through December 2026, which isrights concerning its proprietary Nrf2 activator product platform originally licensed to AbbVie in the estimated minimum period that is needed to complete the performance obligations under the terms ofAbbVie License Agreement and the AbbVie Collaboration Agreement. In exchange for such rights, the Company agreed to pay AbbVie $330.0 million, of which $100.0 million was paid as of December 31, 2019, $150.0 million was paid on June 30, 2020, and $80.0 million will be payable on November 30, 2021. Additionally, the Company will pay AbbVie an escalating, low single-digit royalty on worldwide net sales, on a product-by-product basis, of omaveloxolone and certain next-generation Nrf2 activators. The Company began recognizing revenuerecognized interest expense related to the up-front payment upon executionReacquisition Agreement of the agreement. Duringapproximately $1.6 million and $0 million, during the three months ended June 30, 2020 and 2019, respectively, and 2018, the Company recognized approximately $6,644,000,$3.2 million and $0 million, during the six months ended June 30, 2020 and 2019, and 2018, recognized $13,214,000, as collaboration revenue.respectively. As of June 30, 2019,2020, the Company recordedCompany’s payable to collaborators was $80.0 million, with a present value of $70.1 million.
The execution of the Reacquisition Agreement ended our performance obligations under the AbbVie Collaboration Agreement and included the write off of the remaining related deferred revenue balance, after which no further revenue was recognized. Accordingly, there was 0 revenue recognized in 2020. The Company recognized revenue related to the AbbVie Collaboration Agreement totaling approximately $198,430,000$6.6 million and $13.2 million during the three and six months ended June 30, 2019, respectively. The deferred revenue balance was $0 million as of which approximately $26,720,000 is reflected as the current portion of deferred revenue.June 30, 2020.
KKC
In December 2009, the Company entered ainto an exclusive license agreement with Kyowa Kirin Co., Ltd. (KKC)KKC (the KKC agreement), which granted KKC an exclusive licenseAgreement) to develop and commercialize Bardbardoxolone in the licensed territory. The Company received a nonrefundable, up-front license fee of $35,000,000$35.0 million in 2009 and regulatory milestones totaling $45,000,000$45.0 million in 2010, 2012, and 2018 and could receive additional regulatory milestones of $52,000,000$52.0 million and commercial milestones of $140,000,000,$140.0 million, as well as tiered royalties ranging from the low teens to the low 20 percent range, depending on the country of sale and the amount of annual net sales, on net sales by KKC in the licensed territory.
The up-front payment and regulatory milestones are accounted for as a single unit of accounting. Revenue is being recognized ratably through December 2021, which is the estimated minimum period that is needed to complete the deliverables under the terms of the KKC agreement.Agreement. The Company began recognizing revenue related to the up-front payment upon execution of the agreement. DuringKKC Agreement. The Company recognized collaboration revenue totaling approximately $1.2 million during each of the three months ended June 30, 2020 and 2019 and 2018, the Company recognized approximately $1,169,000 and $875,000, respectively, and$2.3 million during each of the six months ended June 30, 20192020 and 2018, recognized $2,325,000 and $26,472,000, respectively, as collaboration revenue.2019. As of June 30, 2019,2020, the Company recorded deferred revenue totaling approximately $11,752,000$7.1 million of which approximately $4,701,000$4.7 million is reflected as the current portion of deferred revenue.
4. Term Loan
On June 14, 2018,October 9, 2019, the Company entered into anthe First Amendment to the Amended and Restated Loan and Security Agreement (Restated(the Amended Restated Loan Agreement) with Oxford Finance LLC and Silicon Valley Bank (collectively,. Under the Lenders), which amended and restated the Loan and Security Agreement entered into among Reata and the Lenders on March 31, 2017, as amended on November 3, 2017 (Loan Agreement).
Under theAmended Restated Loan Agreement, the Term A Loan principal amount was increased to $80,000,000,$80.0 million, and the Term B Loan availability was increased from $45.0 million to $45,000,000, available to be drawn within 30 days, but no later than December 31, 2019, after the achievement of one of two milestones. If the Company is entitled to draw the Term B Loan but does not draw the Term B Loan by December 31, 2019, the Company is obligated to pay a non-utilization fee of $450,000.
All outstanding Term Loans will mature on June 1, 2023. Under the Term A Loan, the Company will make interest-only payments for 24 months through June 1, 2020; however, if the Company draws the Term B Loan, the Company will make interest-only payments for 36 months through June 1, 2021. The interest-only payment period will be followed by 36 equal monthly payments, or 24 equal monthly payments if the Company draws the Term B Loan, of principal and interest payments. The Term Loans will bear interest at a floating per annum rate calculated as 7.79% plus the greater of the 30-day U.S. Dollar LIBOR rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue or 1.91%, with a minimum rate of 9.7% and maximum rate of 12.29%.
10
funding date, (c) 3.0% of the outstanding principal balance of the applicable Term Loan if prepayment is made after the second anniversary date and on or before the third anniversary of the applicable funding date, or (d) 1.5% of the outstanding principal balance of the applicable Term Loan if prepayment is made after the third anniversary date and on or before the fourth anniversary of the applicable funding date. The Company will also be required to make a final exit fee payment of 6.5% of the principal balance of the Term A Loan and 4.0% of the Term B Loan, payable on the earliest of the prepayment of the Term Loans, acceleration of any Term Loan, or at maturity of the Term Loans.
The Company may use the proceeds from the Term Loans for working capital and to fund its general business requirements. The Company’s obligations under the Restated Loan Agreement are secured by substantially all of its current and future assets, including its owned intellectual property.
As of June 30, 2019, the Company had $80,000,000 outstanding under the Term A Loan, which was recorded at its initial carrying value of $80,000,000, less unamortized discount and debt issuance costs of approximately $5,303,000. In connection$75.0 million (collectively with the Term A Loan, the discount and debt issuance costs were recorded asTerm Loans). On December 20, 2019, the Company borrowed $75.0 million under the Term B Loan resulting in a reduction to debt on itsprincipal balance sheet and are being accreted to interest expense over the life of the Term A Loan. Additionally,Loans of $155.0 million.
On June 24, 2020, the final exit fee of approximately $5,200,000 is being accrued overCompany paid off the lifetotal outstanding balance of the Term Loans prior to the maturity date. The payoff consisted of (i) the outstanding principal balance of $155.0 million, (ii) exit fees of $6.7 million, which has been partially accrued up to the date of repayment, (iii) prepayment fees of $5.4 million, and (iv) accrued and unpaid interest of $1.0 million. At the time of payoff, all liabilities and obligations under the Amended Restated Loan Agreement were terminated. In connection with the payoff of the Term Loans, the Company recorded a loss on extinguishment of debt of $11.2 million in the three and six months ended June 30, 2020.
5. Liability Related to Sale of Future Royalties
On June 24, 2020, the Company closed on the Development Agreement with BXLS. The Development Agreement includes a $300.0 million payment by an affiliate of BXLS in return for various percentage royalty payments on worldwide net sales of bardoxolone, once approved in the United States or certain specified European countries, by Reata and its licensees, other than KKC. The royalty percentage will initially be in the mid-single digits and, in future years, can vary between higher-mid single digit percentages to low-single digit percentages depending on various milestones, including indication approval dates, cumulative royalty payments, and cumulative net sales. Pursuant to the Development Agreement, we have granted BXLS a security interest in substantially all of our assets.
In addition, concurrent with the Development Agreement, the Company entered into a common stock purchase agreement (Purchase Agreement) with affiliates of BXLS to sell an aggregate of 340,793 shares of the Company’s Class A Loan through interest expense. common stock at $146.72 per share for a total of $50.0 million.
The Term A Loan hasCompany concluded that there were 2 units of accounting for the consideration received, comprised of the liability related to the sale of future royalties and the common shares. The Company allocated the $300.0 million from the Development Agreement and $50.0 million from the Purchase Agreement between the two units of accounting on a currentrelative fair value basis at the time of the transaction. The Company allocated $294.2 million, which includes $0.8 million in transaction costs incurred, in transaction consideration to the liability, and $55.5 million to the common shares. The Company determined the fair value of the common shares based on the closing stock price on the June 24, 2020, the closing date of the Development Agreement. The effective interest rate under the Development Agreement, including transaction costs, is approximately 13.7%.
The following table shows the activity within the liability related to sale of 10.98% beforefuture royalties for the six months ended June 30, 2020:
|
| Liability Related to Sale of Future Royalties |
| |
|
| (in thousands) |
| |
Transaction date balance |
| $ | 294,454 |
|
Non-cash interest expense recognized, net of transaction cost amortization |
|
| 664 |
|
Balance at June 30, 2020 |
|
| 295,118 |
|
Less: Unamortized transaction cost |
|
| (884 | ) |
Carrying value at June 30, 2020 |
| $ | 294,234 |
|
6. Other Income (Expense), Net
|
| Three Months Ended |
|
| Six Months Ended | ||||||||||||
|
| June 30 |
|
| June 30 | ||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| ||||
Other income (expense), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income |
| $ | 501 |
|
| $ | 1,705 |
|
| $ | 2,555 |
|
| $ | 3,502 |
|
|
Interest expense |
|
| (5,644 | ) |
|
| (2,413 | ) |
|
| (11,512 | ) |
|
| (4,810 | ) |
|
Non-cash interest expense on liability related to sale of future royalty |
|
| (664 | ) |
|
| — |
|
|
| (664 | ) |
|
| — |
|
|
Other income (expense) |
|
| — |
|
|
| 7 |
|
|
| — |
|
|
| 7 |
|
|
Loss on extinguishment of debt |
|
| (11,183 | ) |
|
| — |
|
|
| (11,183 | ) |
|
| — |
|
|
Total other income (expense), net |
| $ | (16,990 | ) |
| $ | (701 | ) |
| $ | (20,804 | ) |
| $ | (1,301 | ) |
|
Investment Income
Interest income consists primarily of interest generated from our cash and cash equivalents.
Interest Expense
Interest expense consists primarily of interest on our borrowing activities under our loan agreements and the imputed interest from amount due to AbbVie under the Reacquisition Agreement.
Non-Cash Interest Expense on Liability Related to Sale of Future Royalties
Non-cash interest expense consists of recognition of interest expense based on the Company’s current estimate of future royalties expensed to be paid over the estimated term of the Development Agreement.
Other Income (Expense)
Other income (expense) consists primarily of gains and losses on foreign currency exchange and sales of assets.
Loss on Extinguishment of Debt
In June 2020, the Company paid off the Term Loans and recorded a loss on the extinguishment of debt of $11.2 million, which consisted primarily of prepayment fees, exit fees and unamortized debt issuance costs and final exit fee and 13.53% including debt issuance costs and final exit fee. The Company is in compliance with all covenants under the Restated Loan Agreement as of June 30, 2019.costs.
The future principal payments by fiscal year for the Company’s Term A Loan:
|
| As of June 30, 2019 |
| |
|
| (in thousands) |
| |
2019 (remaining six months) |
| $ | — |
|
2020 |
|
| 15,555 |
|
2021 |
|
| 26,667 |
|
2022 |
|
| 26,667 |
|
2023 |
|
| 11,111 |
|
|
| $ | 80,000 |
|
5.7. Leases
The Company’s corporate headquarters are located in Irving,Plano, Texas, where it leases approximately 122,000 square feet of office space. The Company leases additional office and laboratory space of approximately 34,890 square feet located in Irving, Texas. The lease terms for the Irving and Plano offices extend through October 31, 2022 with an option to renew up to six months and through April 30, 2022 with four successive three-month-period renewal options, respectively.
The Company has an additional lease of a single-tenant, build-to-suit building of approximately 327,400 square feet of office and laboratory space. In Februaryspace located in Plano, Texas with an initial lease term of 16 years. The Company entered into the lease agreement on October 15, 2019 (the Lease Agreement), and at the Company’s option, it may renew the lease for two consecutive five-year renewal periods or one ten-year renewal period. The Company does not have control of the space or the construction prior to completion of construction. Therefore, 0 right-of-use or lease liabilities were recorded in connection with the Lease Agreement as of June 30, 2020. Under the First Amendment to the Lease Agreement executed in May 2020, the landlord will fund the Company’s leasehold improvements up to $31.3 million, of which the Company commencedhas recorded a lease forleasehold incentive obligation of approximately 122,000 square feet$1.7 million as other long-term liabilities as of additional office space in Plano, Texas.
The Company’s leases have remaining contractual terms of up to approximately 36 months, which includes the options to extend the leases for up to one year. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.June 30, 2020.
At June 30, 2019,2020, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating leases held by the Company were 8.3%9.6% and 2.82.3 years, respectively. During the three and six months ended June 30, 2019,2020, cash paid for amounts included for the measurement of lease liabilities was $952,000.$1.0 million and $1.9 million, respectively. During the three and six months ended June 30, 20192020 the Company recorded operating lease expense of $919,000$1.0 million and $1,578,000,$1.9 million, respectively. The Company has elected to net the amortization of the right-of-use assets and the reduction of the lease liabilities principal in accrued direct research and other current and long-term liabilities in the consolidated statements of cash flows.
Supplemental balance sheet information related to ourthe Company’s operating leases is as follows:
|
| Balance Sheet Classification |
| As of June 30, 2019 |
|
| Balance Sheet Classification |
| As of June 30, 2020 |
| ||
|
|
|
| (in thousands) |
|
|
|
| (in thousands) |
| ||
Non-current right-of-use assets |
| Other assets |
| $ | 8,981 |
|
| Other assets |
| $ | 7,653 |
|
Current lease liabilities |
| Other current liabilities |
|
| 2,568 |
|
| Other current liabilities |
|
| 3,452 |
|
Non-current lease liabilities |
| Other long-term liabilities |
|
| 7,094 |
|
| Other long-term liabilities |
|
| 5,212 |
|
11
Maturities of lease liabilities by fiscal year for the Company’s operating leases:
|
| As of June 30, 2019 |
|
| As of June 30, 2020 |
| ||
|
| (in thousands) |
|
| (in thousands) |
| ||
2019 (remaining six months) |
| $ | 1,434 |
| ||||
2020 |
|
| 3,999 |
| ||||
2020 (remaining six months) |
| $ | 2,063 |
| ||||
2021 |
|
| 4,090 |
|
|
| 4,142 |
|
2022 |
|
| 1,178 |
|
|
| 3,500 |
|
Total lease payments |
|
| 10,701 |
|
|
| 9,705 |
|
Less: Imputed interest |
|
| (1,039 | ) |
|
| (1,041 | ) |
Present value of lease liabilities |
| $ | 9,662 |
|
| $ | 8,664 |
|
6.8. Income Taxes
On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). The CARES Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and to provide assistance to individuals, families, and businesses affected by COVID-19. Accordingly, under its provisions, for the six months ended June 30, 2020, the Company recognized a tax benefit and receivable of $22.1 million associated with the ability to carryback an applicable prior year’s net operating losses to a preceding year to generate a refund.
For the three months ended June 30, 2020, the Company’s effective tax rate was a benefit of 0.0% compared to 0.0% for the three months ended June 30, 2019. The Company’s effective tax rate for the three months ended June 30, 2020 varies with the statutory rate primarily due to valuation allowances on deferred taxes. For the six months ended June 30, 2020, the Company’s effective tax rate was a benefit of 16.0% compared to 0.0% for the six months ended June 30, 2019. The Company’s effective tax rate for the six months ended June 30, 2020 varies with the statutory rate primarily due to the favorable impact of nondeductible stock-based compensationassociated with the CARES Act and the changes in the valuation allowance related to certain deferred tax assets generated or utilized in the applicable period. The Company’s deferred tax assets have been fully offset by a valuation allowance at June 30, 2019,2020, and the Company expects to maintain this valuation allowance until there is sufficient evidence that future earnings can be achieved, which is uncertain at this time.
The IRS examination team has completed its examination of the Company’s 2013, 2014, and 2015 U.S. tax returns and proposed adjustments with respect to certain items that were reported by the Company for the 2013 tax year. In June 2018, the Company received the Revenue Agent Report from the IRS. The Company believes that it has accurately reported all amounts in its tax returns and has submitted an administrative protest with the IRS contesting the examination team’s proposed adjustments. The Company intends to vigorously defend its reported positions and believes the ultimate resolution of the adjustments proposed by the IRS examination team will not have a material adverse effect on its consolidated financial statements.
7.9. Stock-Based Compensation
Stock Options
The following table summarizes stock-based compensation expense reflected in the consolidated statements of operations:
|
| Three Months Ended June 30 |
|
| Six Months Ended June 30 |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
|
| (in thousands) |
| |||||||||||||
Research and development |
| $ | 7,527 |
|
| $ | 1,659 |
|
| $ | 19,044 |
|
| $ | 3,350 |
|
General and administrative |
|
| 7,269 |
|
|
| 2,824 |
|
|
| 15,060 |
|
|
| 5,360 |
|
|
| $ | 14,796 |
|
| $ | 4,483 |
|
| $ | 34,104 |
|
| $ | 8,710 |
|
Restricted Stock Units (RSUs)
The following table summarizes RSUs as of June 30, 2020, under the Second Amended and Restated Long Term Incentive Plan (LTIP Plan) agreement and standalone option agreements:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
|
| (in thousands) |
| |||||||||||||
Research and development |
| $ | 1,659 |
|
| $ | 974 |
|
| $ | 3,350 |
|
| $ | 1,935 |
|
General and administrative |
|
| 2,824 |
|
|
| 1,578 |
|
|
| 5,360 |
|
|
| 3,102 |
|
|
| $ | 4,483 |
|
| $ | 2,552 |
|
| $ | 8,710 |
|
| $ | 5,037 |
|
|
| Number of RSUs |
|
| Weighted-Average Grant Date Fair Value |
| ||
Outstanding at January 1, 2020 |
|
| 50,000 |
|
| $ | 72.70 |
|
Granted |
|
| 24,751 |
|
| $ | 184.00 |
|
Vested |
|
| — |
|
| $ | — |
|
Forfeited |
|
| — |
|
| $ | — |
|
Outstanding at June 30, 2020 |
|
| 74,751 |
|
| $ | 109.55 |
|
12As of June 30, 2020, the performance targets for the performance-based RSUs have not been met. Accordingly, the fair value related to these performance-based RSUs of approximately $4.2 million has not been recognized. During the quarter ended June 30, 2020, the Company recognized $0.3 million in compensation expense related to time-based RSUs.
Stock Options
The following table summarizes stock option activity as of June 30, 2019,2020, and changes during the six months ended June 30, 2019,2020, under the Second Amended and Restated Long Term Incentive PlanLTIP and standalone option agreements:
|
| Number of Options |
|
| Weighted- Average Exercise Price |
| ||
Outstanding at January 1, 2019 |
|
| 3,320,571 |
|
|
| 21.20 |
|
Granted |
|
| 1,160,233 |
|
|
| 60.53 |
|
Exercised |
|
| (369,076 | ) |
|
| 16.49 |
|
Forfeited |
|
| (265,854 | ) |
|
| 33.02 |
|
Expired |
|
| — |
|
|
| — |
|
Outstanding at June 30, 2019 |
|
| 3,845,874 |
|
|
| 32.79 |
|
Exercisable at June 30, 2019 |
|
| 1,563,869 |
|
|
| 21.13 |
|
|
| Number of Options |
|
| Weighted-Average Exercise Price |
| ||
Outstanding at January 1, 2020 |
|
| 4,038,949 |
|
| $ | 41.24 |
|
Granted |
|
| 973,999 |
|
| $ | 203.19 |
|
Exercised |
|
| (47,351 | ) |
| $ | 37.51 |
|
Forfeited |
|
| (171,917 | ) |
| $ | 94.68 |
|
Outstanding at June 30, 2020 |
|
| 4,793,680 |
|
| $ | 72.27 |
|
Exercisable at June 30, 2020 |
|
| 2,240,699 |
|
| $ | 33.31 |
|
Stock-based compensation expense for the three and six months ended June 30, 2020, included accelerated recognition of expense due to modifications of outstanding stock options as a result of the death of an executive and employees who entered into consulting agreements at the termination of employment, which were considered to be non-substantive services. Accordingly, the Company recognized $2.9 million and $10.0 million for the three and six months ended June 30, 2020, respectively.
As of June 30, 2020, the Company has approximately 303,000 shares of performance-based stock options for which the performance targets have not been met. Accordingly, the fair value related to these performance-based stock options of approximately $34.1 million has not been recognized.
The total intrinsic value of all outstanding options and exercisable options at June 30, 20192020 was $236,740,000$448.7 million and $114,501,000,$278.2 million, respectively.
8.10. Net Loss per Share
The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended June 30 |
|
| Six Months Ended June 30 |
| ||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
|
| (in thousands, except share and per share data) |
|
| (in thousands, except share and per share data) |
| ||||||||||||||||||||||||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (34,380 | ) |
| $ | (28,211 | ) |
| $ | (63,534 | ) |
| $ | (24,129 | ) |
| $ | (67,581 | ) |
| $ | (34,380 | ) |
| $ | (116,520 | ) |
| $ | (63,534 | ) |
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares used in net loss per share – basic |
|
| 30,069,048 |
|
|
| 26,178,793 |
|
|
| 29,950,241 |
|
|
| 26,167,033 |
|
|
| 33,265,778 |
|
|
| 30,069,048 |
|
|
| 33,243,931 |
|
|
| 29,950,241 |
|
Dilutive potential common shares |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Weighted-average number of common shares used in net loss per share – diluted |
|
| 30,069,048 |
|
|
| 26,178,793 |
|
|
| 29,950,241 |
|
|
| 26,167,033 |
|
|
| 33,265,778 |
|
|
| 30,069,048 |
|
|
| 33,243,931 |
|
|
| 29,950,241 |
|
Net loss per share – basic |
| $ | (1.14 | ) |
| $ | (1.08 | ) |
| $ | (2.12 | ) |
| $ | (0.92 | ) |
| $ | (2.03 | ) |
| $ | (1.14 | ) |
| $ | (3.51 | ) |
| $ | (2.12 | ) |
Net loss per share – diluted |
| $ | (1.14 | ) |
| $ | (1.08 | ) |
| $ | (2.12 | ) |
| $ | (0.92 | ) |
| $ | (2.03 | ) |
| $ | (1.14 | ) |
| $ | (3.51 | ) |
| $ | (2.12 | ) |
The number of weighted average options that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive represented 4,793,680 and 3,845,874 and 3,337,509 shares for the six months endedas of June 30, 2020 and 2019, and 2018, respectively.
13
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes and other financial information appearing in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, operations, and product candidates, includes forward-looking statements that involve risks and uncertainties. Factors that may cause actual results to differ materially from current expectations include, among other things, those described under the heading “Risk Factors” and discussed elsewhere in this Quarterly Report on Form 10-Q.
Overview
We are a clinical stageclinical-stage biopharmaceutical company focused on identifying, developing, and commercializing innovative therapies that change patients’ lives for the better. We concentrate on small-molecule therapeutics with novel mechanisms of action for the treatment of severe, life-threatening diseases with few or no approved therapies. Our lead programs are in rare forms of chronic kidney disease (CKD) and a rare neurological disease. We are currently conductinghave announced positive topline data from registrational trials withfor both of our lead product candidates, Bardbardoxolone methyl (bardoxolone) in patients with CKD caused by Alport syndrome and Omav, whichomaveloxolone in patients with a neurological disorder called Friedreich’s ataxia (FA). Both bardoxolone and omaveloxolone activate the transcription factor Nrf2 to normalize mitochondrial function, restore redox balance, and resolve inflammation. Because mitochondrial dysfunction, oxidative stress, and inflammation are features of many diseases, we believe bardoxolone and omaveloxolone have many potential clinical applications. We possess exclusive, worldwide rights to develop, manufacture, and commercialize bardoxolone, omaveloxolone, and our next-generation Nrf2 activators, excluding certain Asian markets for bardoxolone in certain indications, which are licensed to KKC.
Our lead registrational programs are evaluating our product candidatesRegulatory Update
Bardoxolone for CKD Caused by Alport Syndrome
Following the treatmentannouncement of four rare diseases:positive, year one data from the Phase 3 CARDINAL study of bardoxolone in patients with CKD caused by Alport syndrome in November 2019, we have been engaged in discussions with the U.S. Food and Drug Administration (FDA) regarding the Year 1 efficacy and safety results. We have had a Type C meeting where the FDA expressed concerns with basing an NDA for accelerated approval on the Year 1 data and recommended that we consider submitting the NDA with Year 2 data based, in part, on the assumption that there would not be much delay in NDA submission. Following the Type C meeting, we provided written responses, and engaged in follow up informal meetings, that we believe addressed the FDA comments regarding the Year 1 results. Accordingly, we recently requested and were granted a pre-NDA meeting by the FDA to discuss the NDA submission content and plans.
Our plan has been, and continues to be, to submit the NDA for bardoxolone in Alport syndrome during fourth quarter of 2020 for accelerated approval based on the one-year data from the Phase 3 portion of CARDINAL. If the second-year results are available during an acceptable time frame, we may be able to submit the second-year data to the NDA during the review process and before the FDA makes a determination about accelerated approval. This may extend the PDUFA date, but could also result in consideration of full approval, rather than accelerated approval. Alternatively, the FDA could recommend that we wait for the second-year data from CARDINAL to file the NDA. This would permit us to file for full approval but would delay the filing until the first quarter of 2021 compared to our CARDINALcurrent guidance of filing by the end of this year. This timing assumes that we can complete the activities necessary to provide the Year 2 data to the FDA on a timely basis and is, of course, subject to uncertainty resulting from the COVID-19 pandemic. As a result of the measures taken in response to the pandemic, and based on current operational metrics, at this time we believe that the timeline for Year 2 data availability is unlikely to be affected by COVID-19.
Omaveloxolone for Friedreich’s Ataxia
Following the announcement of the positive data from the MOXIe Part 2 study in October 2019, we have planned, subject to discussion with regulatory authorities, to proceed with a submission for marketing approval of
omaveloxolone for the treatment of FA in ourthe United States. We recently completed a Type C meeting in which the FDA provided us with guidance that it does not have any concerns with the reliability of the modified Friedreich’s Ataxia Rating Scale (mFARS) primary endpoint results in the MOXIe Part 2 study. Nevertheless, the FDA is not convinced that the MOXIe Part 2 results will support a single study CTD-PAHapproval without additional evidence that lends persuasiveness to the results. In preliminary comments for the meeting, the FDA stated that we will need to conduct a second pivotal trial that confirms the mFARS results of the MOXIe Part 2 study with a similar magnitude of effect.
In response to the preliminary comments, the Friedreich’s Ataxia Research Alliance (FARA), key FA clinicians, and we provided the FDA with information to demonstrate that it will be difficult to conduct an additional, prospective clinical trial in our CATALYSTFA because of the very slow progression rate of FA, the limited number of FA patients available for clinical research, the small number of clinical trial investigators who can conduct the mFARS exam, and the impact of the COVID-19 pandemic on the ability to conduct neuroscience clinical trials. Thus, conducting an additional pivotal study would result in a long delay in the availability of a potentially effective therapy to patients with a progressive, life-threatening disease with no treatment options. The FDA acknowledged the unmet need of patients with FA, reiterated its commitment to facilitate the development of omaveloxolone within the constraints of the regulatory standards, and emphasized its willingness to consider all available options to meet the regulatory standards. The FDA also acknowledged that launching a new, neuroscience clinical trial now may not be possible because of the COVID-19 pandemic.
At the Type C meeting, to address the FDA’s requirement, FARA, key opinion leaders, and Reata proposed a second study (the “crossover study”) to provide additional evidence of effectiveness. The study would measure the effect of omaveloxolone on mFARS in patients who were previously randomized to placebo in the MOXIe Part 2 study and ADPKDare being treated with omaveloxolone in our FALCONthe MOXIe open-label extension study. We have fully enrolled CARDINALThe FDA acknowledged that a study like the proposed crossover study could provide important additional information and MOXIe andasked us to submit a design for the crossover study for their consideration.
If the FDA accepts this approach, we expect to have top-linecomplete the crossover study as early as the fourth quarter of this year. Assuming that the FDA views the crossover study data as sufficiently positive to provide confirmatory evidence, our plan would be to submit an NDA during the first quarter of 2021. If the FDA rejects the proposal or if the data are not supportive, we will evaluate whether it is feasible to conduct a second pivotal study in FA patients as suggested by the FDA. Regardless of the interaction with the FDA, we plan to pursue marketing approval outside of the United States.
Second Quarter 2020 Key Developments
Strategic Investment from bothBlackstone Life Sciences
On June 24, 2020, we closed a Development and Commercialization Funding Agreement (Development Agreement) with an affiliate of these clinical trialsBlackstone Life Sciences, LLC (BXLS) that provides funding for the development and commercialization of bardoxolone for the treatment of CKD caused by Alport syndrome, autosomal dominant polycystic kidney disease (ADPKD), and certain other rare CKD indications. The Development Agreement includes a $300 million payment by the Blackstone affiliate in return for various percentage royalty payments on worldwide net sales of bardoxolone by Reata and its licensees, other than KKC. The royalty percentage will initially be in the second halfmid-single digits and in future years can vary between higher-mid single digit percentages to low-single digit percentages depending on various milestones, including indication approval dates, cumulative royalty payments, and cumulative net sales. Pursuant to the Development Agreement, we have granted BXLS a security interest in substantially all of 2019.our assets.
In addition, affiliates of BXLS paid us an aggregate of $50.0 million to purchase an aggregate of 340,793 shares of our Class A common stock, par value $0.001 per share, at $146.72 per share.
In connection with the closing of the Development Agreement, we fully paid off our senior loan with Oxford Finance LLC and Silicon Valley Bank that included $155.0 million in principal and $12.1 million in exit and prepayment fees.
FALCON Trial Enrollment Resumed
In March 2020, we temporarily paused enrollment of new patients in the global Phase 3 FALCON trial of bardoxolone in patients with ADPKD due to the emergence of COVID-19 as a global public health threat. We expect to complete enrollmentenroll a total of CATALYSTapproximately 300 patients worldwide. We began to lift the screening hold in FALCON in June 2020, and currently, all sites are able to screen patients and approximately half are able to randomize patients. The first patients have now reached the second year of the trial. The measures we implemented to the conduct of FALCON in response to COVID-19 have been effective, and we anticipate no meaningful impact on data integrity due to COVID-19.
Adjustments to Operations Due to COVID-19
Beginning in the first quarter of 2020, in accordance with recommendations from local, state, and national health authorities, we implemented and continue to enforce work-from-home measures and additional safety protocols to protect employees and the broader community and to ensure business continuity. These measures include restricting on-site staff to only those required to execute their job responsibilities and limiting the number of staff working in our research and development laboratory. We also continue to limit in-person meetings and business travel. We will continue to monitor this yeardynamic situation closely and have top-line datawill take additional measures as required to preserve the safety of our employees and the broader community.
CARDINAL and EAGLE Trials Adapted for Continuity
The Phase 3 CARDINAL trial of bardoxolone in patients with CKD caused by Alport syndrome is fully enrolled and ongoing. As previously announced, we are in the process of completing the Year 2 portion of our CARDINAL Phase 3 study. As COVID-19 emerged as a pandemic with serious public health implications during the first halfquarter of 2020. We began enrollment2020, we undertook a series of FALCONmeasures to protect the health and safety of patients and health care workers involved in May 2019. If we receive FDA approval for anyour ongoing clinical studies, while maintaining the conduct of these indications, it may provide expansion opportunities into other related indications. We have received orphan drug designation fromour studies in accordance with guidance provided by the FDA and the European CommissionMedicines Agency. For example, we have implemented the use of at-home visits as an alternative to in-clinic visits when necessary to collect blood draws and to assess patient safety. We also arranged for Bardhome delivery of the study drug to patients.
At this time, approximately 60% of the 157 patients randomized to the CARDINAL Phase 3 cohort have completed the Year 2 final off-treatment visit. The last study visits are anticipated to occur during the fourth quarter of 2020, which is consistent with our pre-COVID-19 timeline. Currently, almost all sites are allowing on-site or remote monitoring.
Patients who participated in the CARDINAL study may be eligible to enroll in an open-label extension study known as EAGLE. We are implementing procedures for the conduct of EAGLE that are similar to those being used in CARDINAL to ensure continued access to bardoxolone and appropriate safety monitoring.
MOXIe Extension Study Advanced with Modifications
The MOXIe Part 2 trial was completed prior to the onset of the COVID-19 pandemic. Patients who participated in MOXIe Part 1 or 2 were eligible to enroll in an open-label extension portion of the study. We are implementing procedures for the conduct of the MOXIe extension study that are similar to those being used in our other ongoing studies to ensure continued access to omaveloxolone and appropriate safety monitoring.
BARCONA Study of Bardoxolone in Patients with COVID-19
Researchers at NYU Grossman School of Medicine (NYU) are initiating an Investigator-Sponsored Trial (IST), known as BARCONA, to study the effect of bardoxolone in patients suffering from COVID-19. Serious complications of COVID-19 are caused by excessive, systemic inflammation, which can result in dysfunction of the lungs, kidneys, and other organs. Acute kidney injury has been reported to occur in up to 28% of all hospitalized COVID-19 patients, and in up to 72% of patients who do not survive COVID-19. Bardoxolone and its analogs have demonstrated anti-inflammatory activity in animal models of acute lung and kidney injury, have increased survival in models of systemic inflammation, suppress replication of several types of viruses and have shown improvements in kidney function in multiple clinical trials that enrolled over 3,000 patients with various forms of chronic kidney disease.
The Phase 2 BARCONA study is a randomized, placebo-controlled, double-blind trial that will enroll 40 patients with a primary endpoint of safety and treatment duration of up to 29 days in hospitalized patients. Major exclusion criteria include patients who are intubated and on invasive mechanical ventilation for three or more days, prior hospitalization for heart failure, or estimated glomerular filtration rate (eGFR) <30 ml/min/1.73 m2. To further mitigate any safety risk, enrollment will be paused after enrollment of the initial five patients to assess safety. As with all trials conducted at NYU, the trial will be overseen by a Data Safety Monitoring Board that meets every other week.
We were involved in the design of the trial, have a representative on the study’s executive steering committee, and are providing drug supply, as requested by NYU. Any further enrollment in a potential Phase 3 trial will be gated based on an assessment of Phase 2 safety and activity, as well as feasibility of conducting a Phase 3 trial.
Background: Our Programs
The following chart outlines each of our programs by indication and phase:
In addition, KKC, our strategic collaborator in CKD, is currently conducting its registrational trial of bardoxolone in diabetic (type 1 and 2) CKD in Japan. KKC completed patient enrollment in this trial in June 2019 and expects to have topline data in the first half of 2022.
NYU has initiated an IST (Phase 2/3 trial) of bardoxolone in COVID-19 patients called BARCONA.
*The CARDINAL study reported one-year data in November 2019 and is an ongoing two-year study.
**See discussion above under “Regulatory Update-Omaveloxolone for Friedreich's Ataxia”.
Programs in CKD
We are developing bardoxolone for the treatment of patients with certain rare forms of CKD. CKD is characterized by a progressive worsening in the rate at which the kidney filters waste products from the blood, called the glomerular filtration rate (GFR). When GFR gets too low, patients develop end-stage kidney disease (ESKD) and require dialysis or a kidney transplant to survive. Dialysis leads to a reduced quality of life and increases the likelihood of serious and life-threatening complications. The five-year survival rate for hemodialysis patients is only approximately 42%.
Estimated glomerular filtration rate (eGFR) is an estimate of GFR that nephrologists use to track the decline in kidney function and progression of CKD. In 11 separate CKD clinical trials, bardoxolone has been shown to improve eGFR in patients with diverse etiologies of CKD. We believe that bardoxolone treatment has the potential
to delay or prevent GFR declines that cause the need for dialysis or a transplant in patients with Alport syndrome, ADPKD, and other rare forms of CKD.
Bardoxolone in CKD Caused by Alport Syndrome
We are developing bardoxolone for the treatment of patients with CKD caused by Alport syndrome, ADPKD, and other rare forms of CKD that, in the aggregate, affect more than 700,000 patients in the United States.
Alport syndrome is a rare, genetic form of CKD caused by mutations in the genes encoding type IV collagen, which is a major structural component of the glomerular basement membrane in the kidney. The kidneys of patients with Alport syndrome progressively lose the capacity to filter waste products out of the blood, which can lead to ESKD and the need for chronic dialysis treatment or a kidney transplant. Alport syndrome affects both children and adults. In patients with the most severe forms of the disease, approximately 50% progress to dialysis by age 25, 90% by age 40, and nearly 100% by age 60. According to the Alport Syndrome Foundation, Alport syndrome affects approximately 30,000 to 60,000 people in the United States. There are currently no approved therapies to treat CKD caused by Alport syndrome.
In November 2019, we announced that the Phase 3 portion of the CARDINAL study of bardoxolone in patients with CKD caused by Alport syndrome met its primary and key secondary Year 1 endpoints. After 48 weeks of treatment, patients treated with bardoxolone had a statistically significant improvement compared to placebo in mean eGFR of 9.50 mL/min/1.73 m2 (p<0.0001). At Week 52, after 48 weeks of treatment and four weeks of off-treatment period, patients treated with bardoxolone had a statistically significant improvement compared to placebo in mean eGFR of 5.14 mL/min/1.73 m2 (p=0.0012), while patients in the placebo arm of CARDINAL lost an average of 6.1 mL/min/1.73 m2. The retained benefit of kidney function during the off-treatment period is a key regulatory endpoint for the CARDINAL and FALCON studies. Based on these positive results, and subject to discussions with regulatory authorities, we plan to proceed with the submission of regulatory filings this year for marketing approval in the United States.
Bardoxolone in ADPKD
ADPKD is a rare and serious hereditary form of CKD caused by a genetic defect in PKD1 or PKD2 genes leading to the formation of fluid-filled cysts in the kidneys and other organs. Cyst growth can cause the kidneys to expand up to five to seven times their normal volume, leading to pain and progressive loss of kidney function. ADPKD affects both men and women of all racial and ethnic groups and is the leading inheritable cause of kidney failure with an estimated diagnosed population of 140,000 patients in the United States. Despite current standard of care treatment, an estimated 50% of ADPKD patients progress to ESKD and require dialysis or a kidney transplant by 60 years of age.
In a Phase 2 study called PHOENIX, bardoxolone demonstrated a statistically significant increase from baseline in mean eGFR of 9.3 mL/min/1.73 m2 (p<0.0001) after 12 weeks of treatment in 31 patients with ADPKD. Available historical data for 29 of these patients showed an average annual decline in eGFR of 4.8 mL/min/1.73 m2 in the three-year period prior to study entry. The United States Food and Drug Administration (FDA) has provided us with written guidance that, in patients with ADPKD, an analysis of eGFR during the off-treatment period demonstrating an improvement versus placebo after one year of bardoxolone treatment may support accelerated approval, and an improvement versus placebo after two years of treatment may support full approval. In May 2019, we began enrollment in FALCON, an international, multi-center, randomized, double-blind, placebo-controlled Phase 3 trial studying the safety and efficacy of bardoxolone in approximately 300 patients with ADPKD. The enrollment of new patients was temporarily paused in March of 2020 due to safety concerns related to the COVID-19 global pandemic, and the screening hold in FALCON was lifted in June 2020 at some sites. The trial will enroll a broad range of patients from 18 to 70 years old with an eGFR between 30 to 90 mL/min/1.73 m².
Bardoxolone in Other Rare Forms of CKD
Three additional rare forms of CKD were studied in PHOENIX, including IgA nephropathy (IgAN), type 1 diabetic CKD (T1D CKD), and focal segmental glomerulosclerosis (FSGS). In each of these Phase 2 cohorts, bardoxolone demonstrated a statistically significant increase from baseline in mean eGFR after 12 weeks of treatment. We plan to pursue each of these rare and serious forms of CKD as commercial indications.
The FDA has granted orphan drug designation to bardoxolone for the treatment of Alport syndrome and for OmavADPKD, and the European Commission has granted orphan drug designation to bardoxolone for the treatment of FA and from the FDA for Bard for the treatmentAlport syndrome.
Historical Development of PAH and ADPKD.Bardoxolone
The chart below is a summary ofPrior to our current registrational programs:
| ||
|
|
|
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
|
Bard in CKD Caused by Alport Syndrome and Additional Rare Forms of CKD
Bard has been evaluated in multipleCARDINAL Phase 3 trial, clinical trials enrolling over 2,000 patients exposed to active drug and hasbardoxolone have demonstrated consistent, clinically meaningful improvement in kidney function across several disease states as measured by estimated glomerular filtration rate (eGFR)eGFR and other markers of kidney function. Specifically, we have observed statistically significant increases in eGFR in all Phase 2 and Phase 3 clinical trials in seven distinctnumerous patient populations treated with Bard,bardoxolone, including patients with PAH and CKD caused by type 2 diabetes (T2D CKD), Alport syndrome, ADPKD, IgA nephropathy (IgAN), type 1 diabeticIgAN, T1D CKD, (T1D CKD), and focal segmental glomerulosclerosis (FSGS).FSGS.
14
We believe these data, in addition to the CARDINAL Phase 3 one-year data, support the potential for Bardbardoxolone to delay or prevent dialysis, kidney transplant, and death in patients with Alport syndrome and other rare forms of CKD.
Additional observations from the prior clinical trials of Bardbardoxolone include the following:
| • | Statistically significant increases in directly-measured GFR using the “gold standard” inulin clearance method, improvements in creatinine clearance, and reduction in the levels of blood waste products filtered by the kidney. |
| • |
|
| Sustained improvement in kidney function in long-term trials: |
| o | In the Phase 2 portion of CARDINAL, |
| o | In two large, placebo-controlled clinical studies (BEAM and BEACON) in patients with T2D CKD, statistically significant increases in mean eGFR of 14.9 mL/min/1.73 m2 (p<0.001) and 5.6 mL/min/1.73 m2 (p<0.001), respectively, were sustained for at least one year. |
| • | Reduction in risk of adverse kidney outcomes, suggesting that |
| o | In BEACON, patients randomized to |
| o | In BEACON, |
| • | Statistically significant improvement in |
| o | The FDA has provided guidance to us and other sponsors that clinical trials with |
| o | We believe the |
Programs in Neurological Diseases
Omaveloxolone in FA
We are developing Bard for the treatment of patients with CKD in the following settings: Alport syndrome in our registrational CARDINAL study, ADPKD in our registrational FALCON study, and four rare forms of CKD in our Phase 2 PHOENIX study. In addition, KKC, one of our strategic collaborators, is currently conducting its registrational trial of Bard in diabetic (type 1 and 2) kidney disease in Japan. KKC completed patient enrollment in this trial in June 2019, with data expected in the first half of 2022.
CARDINAL, a Study in Patients with CKD Caused by Alport Syndrome
Alport syndrome is a rare and serious hereditary disease that manifests as early as the first decade of life and causes average annual declines in eGFR of approximately 3 to 4 mL/min/1.73 m2 and affects approximately 30,000 to 60,000 patients in the United States. In patients with the most severe forms of the disease, approximately 50% progress to dialysis by age 25, 90% by age 40, and nearly 100% by age 60. There are no approved therapies for Alport syndrome anywhere in the world.
15
In 2018, we announced positive interim safety and efficacy data for the ongoing open-label Phase 2 portion of CARDINAL. The Phase 2 portion of the trial enrolled 30 patients, and 25 patients were available for analysis through one year. No patients discontinued due to drug-related adverse events. Data demonstrate that Bard significantly improved kidney function in patients with Alport syndrome as measured by eGFR. In the Phase 2 portion of CARDINAL, we noted the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Phase 3 portion of CARDINAL is an international, multi-center, randomized, double-blind, placebo-controlled trial that is studying the safety and efficacy of Bard in patients with CKD caused by Alport syndrome. We are currently conducting the Phase 3 portion of CARDINAL. The protocol allows for enrollment of approximately 150 patients randomized evenly to either Bard or placebo. The FDA has provided us with guidance that an analysis of retained eGFR, demonstrating an improvement versus placebo after one year of Bard treatment, may support an NDA submission for accelerated approval of Bard for the treatment of CKD caused by Alport syndrome, and data demonstrating an improvement versus placebo in retained eGFR after two years of treatment may support full approval. We expect to have one year top-line results available in the second half of 2019. The analysis plan specifies analysis of covariance (ANCOVA) using off-treatment values as the analysis method for Week 52, and with 157 patients enrolled, the study could detect a placebo-corrected difference in change from baseline eGFR of approximately 2.5 mL/min/1.73m2. No safety concerns have been reported by the DMC.
16
FALCON, a Study in Patients with ADPKD
ADPKD is an inherited, rare form of CKD caused by a genetic defect in PKD1 or PKD2 and is characterized by formation of fluid-filled cysts in the kidneys. Inflammation appears to play a role in cyst growth and is associated with disease progression in ADPKD. PKD1 is the most common mutation, causing about 85% of ADPKD cases, and patients generally progress to ESKD, on average, by age 54. ADPKD is the most common single-gene disorder of the kidneys, and there are an estimated 400,000 patients in the United States, with approximately 140,000 diagnosed. The only therapy currently approved for ADPKD is tolvaptan, which was approved in the United States in 2018.
We have initiated a registrational Phase 3 trial called FALCON in patients with ADPKD. FALCON is an international, multi-center, randomized, double-blind, placebo-controlled trial studying the safety and efficacy of Bard in approximately 300 patients with ADPKD randomized one-to-one to active drug or placebo. We began enrollment in FALCON in May 2019. The FDA has provided us with guidance that, in patients with ADPKD, an analysis of retained eGFR, demonstrating an improvement versus placebo after one year of Bard treatment, may support an NDA submission for accelerated approval of Bard for the treatment of ADPKD, and data demonstrating an improvement versus placebo in retained eGFR after two years of treatment may support full approval. We will measure the retained eGFR benefit versus placebo at 52 weeks after treatment on study drug for 48 weeks and a four-week withdrawal of drug. After 52 weeks, patients will resume study drug and will continue on study drug for a second year. The second-year retained eGFR benefit will be measured at Week 104.
PHOENIX, a Study in Patients with Rare Forms of CKD
PHOENIX was an open-label, multi-center Phase 2 trial evaluating the safety and efficacy of Bard in patients with ADPKD, IgAN, T1D CKD, or FSGS. In aggregate, the prevalence of these diseases exceeds 700,000 patients in the United States, representing a meaningful market for Bard in rare forms of CKD. A total of 103 patients were enrolled in the study in four separate cohorts, including 31 patients with ADPKD, 26 with IgAN, 28 with T1D CKD, and 18 with FSGS. Patients were treated with Bard for 12 weeks in all four cohorts, and each cohort showed statistically significant increases in mean eGFR., with the mean change in eGFR from baseline across all four cohorts of 7.8 mL/min/1.73 m2 (n=103; p<0.0001). Of the patients that reached Week 12, 88% experienced increases in eGFR at Week 12. Bard significantly reduced mean systolic blood pressure by 3.8 mmHg (n=103; p=0.002) and mean diastolic blood pressure by 2.8mmHg (n=103; p=0.0009). Urinary albumin excretion was low upon study entry and remained unchanged by Bard treatment (n=103; p=0.6). The most commonly reported adverse event across all cohorts was muscle spasms, which were not associated with clinical signs or symptoms of muscle injury. No SAEs were reported as related to Bard.
Based on the eGFR improvements observed in PHOENIX patients, we plan to pursue IgAN, T1D CKD, and FSGS as commercial indications. We believe that registrational clinical trials similar to the design of the Phase 3 CARDINAL and FALCON trials with a two-year duration and a retained eGFR benefit endpoint after one and two years of treatment would be sufficient to form the basis of an NDA submission to the FDA seeking approval of Bard for the treatment of these forms of CKD.
Omav in FA
We are developing Omavomaveloxolone for the treatment of patients with FA, an inherited, debilitating, and degenerative neuromuscular disorder whichthat is normallytypically diagnosed during adolescence and is caused by a mutation in the frataxin gene. Patients with FA typically become dependent on wheelchairs 10leads to 15 years after disease onset, with a median age of death in the mid-30s.premature death. Patients with FA experience an average annual worsening,progressive loss of coordination, muscle weakness, and fatigue, which commonly progresses to motor incapacitation and wheelchair reliance. Symptoms generally occur in children, with patients requiring a wheelchair by their teens or increase, in modified Friedreich’s Ataxia Rating Scale (mFARS) scores of one to two points.early 20s. FA is an ultra-orphan disease that, based on literature and proprietary research, we believe affects approximately 22,000 people globally, including 6,0005,000 children and adults in the United States. Approximately 2,700 worldwide patients are identified in patient registries, including approximately 1,500 in the United States.States and 22,000 individuals globally. There are currently no currently approved therapies for the treatment of FA anywhere in the world.
17
MOXIe, a Study in Patients with FAto treat FA.
Our Phase 2 trial, called MOXIe, is a two-part, international, multi-center, randomized, double-blind, placebo-controlled registrational trialIn October 2019, we announced that studies the safety and efficacy of Omav in patients with FA. In part 1 of MOXIe, at the optimal dose level of Omav, we noted the following at Week 12:
|
|
|
|
|
|
|
|
We are currently conducting the registrational part 2 portion of the MOXIe and thePhase 2 trial has been fully enrolledof omaveloxolone in patients with 103 patients. TheFA met its primary endpoint of the trial is the change from baseline in mFARS score, a neurological and functional assessment tool, in patients treated with Omav comparedrelative to placebo at 48 weeks. The FDA has provided us with guidance that an analysis of mFARS scores demonstrating an improvement versus placebo after 48 weeks of Omavtreatment. Patients treated with omaveloxolone (150 mg/day) demonstrated a statistically significant, placebo-corrected 2.40 point mean improvement (decrease) in mFARS after 48 weeks of treatment may support an NDA submission for Omav(p=0.014). Patients treated with omaveloxolone demonstrated improvement in every subcategory measured under mFARS. Omaveloxolone treatment was generally reported to be well-tolerated. The FDA and the European Commission have granted orphan drug designation to omaveloxolone for the treatment of FA.
TheAs discussed above under “Regulatory Update-Omaveloxolone for Friedreich’s Ataxia,” the FDA recently published draft guidance titled “Enhancingwill consider whether a crossover study of omaveloxolone using placebo patients from MOXIe Part 2 who were crossed over to omaveloxolone treatment in the DiversityMOXIe extension study could serve as additional confirmatory evidence. If the FDA accepts the proposal, we could have completed data from the crossover study in the fourth quarter of Clinical Trial Populations”this year. Assuming that encourages sponsorsthe crossover study data are sufficiently positive to provide confirmatory evidence, our plan would be to submit an NDA during the first quarter of 2021. If the FDA rejects the proposal or if the data are not supportive, we will evaluate whether it is feasible to conduct a second pivotal study broader participant groupson FA patients as partsuggested by the FDA. Regardless of the secondary efficacy and safety analyses, even wheninteraction with the primary efficacy analysis population is narrowed. FDA, we plan to pursue marketing approval outside of the United States.
Omaveloxolone in Other Potential Indications
In part 2 of MOXIe,addition, we have included a predictive enrichment strategy that is consistent withobserved compelling activity of omaveloxolone and our other Nrf2 activators in preclinical models of Parkinson’s disease, dementia, epilepsy, Huntington’s disease, and amyotrophic lateral sclerosis (ALS), and we plan to pursue the recommendationsdevelopment of omaveloxolone and our other Nrf2 activators for one or more of these diseases.
RTA 901 in the guidance. Patients with pes cavus, a musculoskeletal foot deformity, may represent a different subtype of FA, having a different pathophysiologyNeurodegeneration and clinical phenotype. Analysis of Part 1 data showed that treatment with Omav did not significantly improve the key studied endpoint, mFARS, in patients with pes cavus. The presence of pes cavus may interfere with the ability to perform assessments that require standing, walking or pedaling. We included patients with pes cavus in the study to ensure that the broad FA population is represented even though these patients may be less likely to have a measurable response in mFARS. As a predictive enrichment strategy, the primary analysis population for Part 2 efficacy is narrowed to the 83 patients enrolled without pes cavus. As a result, the minimum detectable placebo-corrected difference in mFARS is approximately 1.3 points assuming similar variability to that observed in part 1 of MOXIe. FDA has reviewed and provided guidance on our revised statistical analysis plan and the predictive enrichment strategy.
Safety and efficacy will be assessed descriptively for the broader participant group that includes all patients enrolled. We expect to have top-line data from MOXIe available in the second half of 2019. No safety concerns have been reported by the DSMB.
Bard in Connective Tissue Disease Associated Pulmonary Arterial Hypertension
CATALYST, a Study in Patients with CTD-PAHNeuroprotection Diseases
We are studying Bardalso developing RTA 901 in CTD-PAH, which is a late and often fatal manifestation of many types of autoimmune disease, including systemic sclerosis (scleroderma), systemic lupus erythematosus, mixed connective tissue disease, and others. CTD-PAH is a subset of PAH, which results in a progressive increase in pulmonary vascular resistance, ultimately leading to right ventricular heart failure and death. Based on literature and proprietary research, we believe there are approximately 12,000 patients with CTD-PAH in the United States and 50,000 worldwide.
In comparison to patients with the idiopathic form of PAH (I-PAH), patients with CTD-PAH generally have a worse prognosis and experience a higher occurrence of small vessel fibrosis and pulmonary veno-obstructive diseases. CTD-PAH represents approximately 30% of the overall PAH population and approximately 10 to 15% of
18
patients with scleroderma or lupus erythematosus. Patients with CTD-PAH are less responsive to existing vasodilator therapies than patients with I-PAH and have a five-year survival rate of approximately 44%, in contrast with a five-year survival rate of approximately 68% for patients with I-PAH. Currently approved therapies, all systemic vasodilators, are used to treat all etiologies of PAH. By a meta-analysis of 11 registrational trials comprised of more than 2,700 patients, the currently approved therapies were shown to be less beneficial for patients with CTD-PAH compared to patients with I-PAH as measured by 6-minute walk distance (6MWD) responses in patients with CTD-PAH of 9.6 meters, or approximately one-third, compared to the responses in patients with I-PAH of 30 meters. Bard is an Nrf2 activator, not a systemic vasodilator, and directly targets the bioenergetic and inflammatory components of PAH. Additionally, because Bard does not have systemic hemodynamic effects or cause drug-drug interactions in patients with PAH, it may be used in combination with other therapies to a greater incremental effect than an additional vasodilator.
Initial results from our Phase 2 LARIAT trial in patients with PAH showed that Bard provided the greatest improvement in 6MWD to patients with CTD-PAH. Patients with CTD-PAH treated with Bard demonstrated a statistically significant increase of 38.2 meters (p<0.001) in mean 6MWD compared to baseline and a placebo-corrected change in 6MWD of 28.4 meters (p=0.07). Further analysis of data from patients with CTD-PAH who would be eligible for inclusion in our Phase 3 trial, CATALYST, demonstrated a statistically significant increase of 42.7 meters (p<0.001) in mean 6MWD compared to baseline and a placebo-corrected change in 6MWD of 48.5 meters (p=0.005).
We are currently conducting CATALYST, an international, multi-center, randomized, double-blind, placebo-controlled Phase 3 trial that studies the safety and efficacy of Bard in patients with CTD-PAH when added to standard-of-care therapy. The protocol includes 200 patients with CTD-PAH, and we expect to have top-line data from the CATALYST trial in the first half of 2020. Data from CATALYST demonstrating an improvement in 6MWD versus placebo may support an NDA submission for approval of Bard for the treatment of CTD-PAH. No safety concerns have been reported by the DSMB.
Other Programs
neurological indications. RTA 901 is the lead product candidate from our Hsp90 modulator program, which includes highly potent and selective C-terminal modulators of Hsp90.program. We have observed favorable activity of RTA 901 in a range of preclinical models of neurodegeneration and neuroprotection,neurological disease, including models of diabetic neuropathy, neural inflammation,neuroinflammation, and neuropathic pain. RTA 901, administered orally once-daily, has been observed to rescue existing nerve function, restore thermal and mechanical sensitivity, and improve nerve conductance velocity and mitochondrial function in rodent disease models. We have completed a Phase 1 trial to evaluate the safety, tolerability, and pharmacokinetic profile of RTA 901 administered orally, once-daily in healthy adult volunteers. Novolunteers, and no safety or tolerability concerns were reported. We plan to continue development for RTA 901 in neurological diseases, such as diabetic neuropathy. We are the exclusive licensee of RTA 901 and have worldwide commercial rights.
Other Clinical Programs
In addition, we are developing RTA 1701, is the lead product candidate from our proprietary series of RORγt inhibitors, for the potential treatment of a broad range of autoimmune, inflammatory, and fibrotic diseases. RTA 1701 is an orally-bioavailable, RORγt-selective allosteric inhibitor that suppresses Th17 differentiation in vitro and demonstrates strong efficacy in rodent disease models of autoimmune disease. RTA 1701 also potently suppresses production of IL-17A, a clinically important cytokine, in human immune cells and when dosed orally to non-human primates. We have conductedcompleted a Phase 1 trial to evaluate the safety, tolerability, and pharmacokinetic profile of RTA 1701 in healthy adult volunteers. No safety or tolerability concerns were reported, and we observed an acceptable pharmacokinetic profile. We plan to continue development for RTA 1701 in autoimmune, inflammatory, or fibrotic diseases. We retain all rights to our RORγt inhibitors, which are not subject to any existing commercial collaborations.
Financial OperationsCorporate Overview
To date, we have focused most of our efforts and resources on developing our product candidates and conducting preclinical studies and clinical trials. We have historically financed our operations primarily through revenue generated from our collaborations with AbbVie and KKC, from sales of our securities, with secured loans, and secured loans.most recently from a strategic financing from BXLS. We have not received any payments or revenue from collaborations other than nonrefundable upfront, milestone, and cost sharing payments from our collaborations with AbbVie and KKC, from the Development Agreement with BXLS, and from reimbursements of expenses under the terms of our agreement with KKC. We have incurred losses in each year since our inception, other than in 2014. As of June 30, 2019,2020, we had $280.4$610.4 million of cash and cash equivalents and an accumulated deficit of $483.9
19
$827.0 million. We continue to incur significant research and development and other expenses related to our ongoing operations. Despite contractual product development commitments and the potential to receive future payments from our collaborators,KKC, we anticipate that we will continue to incur losses for the foreseeable future, and we anticipate that our losses will increase as we continue our development of, and seek regulatory approval for, and potential commercialization of our product candidates. If we do not successfully develop and obtain regulatory approval of our existing product candidates or any future product candidates and effectively manufacture, market, and sell any products that are approved, we may never generate revenue from product sales. Furthermore, even if we do generate revenue from product sales, we may never again achieve or sustain profitability on a quarterly or annual basis. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital. Our failure to become and remain profitable could depress the market price of our Class A common stock and could impair our ability to raise capital, expand our business, diversify our product offerings, or continue our operations.
Financial Operations Overview
Revenue
Our revenue to date has been generated primarily from licensing fees received under our collaborative license agreements and reimbursements for expenses. We currently have no approved products and have not generated any revenue from the sale of products to date. In the future, we may generate revenue from product sales, royalties on product sales, reimbursements for collaboration services under our current collaboration agreements, or license fees, milestones, or other upfront payments if we enter into any new collaborations or license agreements. We expect that our future revenue will fluctuate from quarter to quarter for many reasons, including the uncertain timing and amount of any such payments and sales.
Our license and milestone revenue has been generated primarily from our license agreement withthe KKC our license agreement withAgreement, the AbbVie License Agreement, and our collaboration agreement withthe AbbVie Collaboration Agreement and consists of upfront payments and milestone payments. License revenue recorded with respect to the KKC agreement,Agreement, the AbbVie License Agreement, and the AbbVie Collaboration Agreement consists solely of the recognition of deferred revenue. Under our revenue recognition policy, collaboration revenue associated with upfront, non-refundable license payments received under theour license and collaboration agreements with AbbVie and KKC are deferred and recognized ratably over the expected term of the performance obligations under each agreement. Under the agreements. TheReacquisition Agreement, we no longer have performance obligations under the AbbVie CollaborationLicense Agreement and the AbbVie Collaboration Agreement. We only expect to recognize revenue under the KKC agreement extendAgreement, which extends through 2021, and 2026, respectively. 2021.
Research and Development Expenses
The largest component of our total operating expenses has historically been our investment in research and development activities, including the clinical development of our product candidates. From our inception through June 30, 2019,2020, we have incurred a total of $702.5$859.4 million in research and development expense, thea majority of which relates to the development of Bardbardoxolone and Omav.omaveloxolone. We expect our research and development expense to continue to increase in the future as we advance our product candidates through clinical trials and expand our product candidate portfolio. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and we consider the active management and development of our clinical pipeline to be crucial to our long-term success. The actual probability of success for each product candidate and preclinical
program may be affected by a variety of factors, including the safety and efficacy data for product candidates, investment in the program, competition, manufacturing capability, and commercial viability.
Research and development expenses include:
| • | expenses incurred under agreements with clinical trial sites that conduct research and development activities on our behalf; |
| • | expenses incurred under contract research agreements and other agreements with third parties; |
| • | employee and consultant-related expenses, which include salaries, benefits, travel, and stock-based compensation; |
20
| • | laboratory and vendor expenses related to the execution of preclinical and non-clinical studies and clinical trials; |
| • | the cost of acquiring, developing, manufacturing, and distributing clinical trial materials; |
| • | the cost of development, scale up, and process validation activities to support product registration; and |
| • | facilities, depreciation, and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance, and other supply costs. |
Research and development costs are expensed as incurred. Costs for certain development activities such as clinical trials are highly judgmental and are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites.
We base our expense accruals related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and contract research organizations (CROs) that conduct and manage clinical trials on our behalf. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing costs, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates.
To date, we have not experienced significantmaterial changes in our estimates of accrued research and development expenses after a reporting period. However, due to the nature of estimates, we cannot assure you that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical trials and other research activities.
Currently, AbbVie is not participatingKKC has allowed us to conduct clinical studies of bardoxolone in the developmentcertain rare forms of Bard for the treatment of CKD caused by Alport syndrome, ADPKD, CTD-PAH, or other rare kidney diseases in Japan and we are therefore incurring all costs for this program. AbbVie has the right to opt-in to these programs at any time during development. Upon opting-in, AbbVie would be required to pay an agreed upon amount of all development costs accumulated up to the point of exercising their opt-in right. All development costs incurred after AbbVie’s opt-in would be split equally.
In September 2016, we and AbbVie mutually agreed that we would continue unilateral development of Omav. Therefore, AbbVie no longer co-funds the exploratory development costs of this program, but retains the right to opt back in. Depending upon what point, if any, AbbVie opts back into development, AbbVie may retain its right to commercialize a product outside the United States, or we may be responsible for commercializing the product on a worldwide basis. Upon opting back in, AbbVie would be required to pay an agreed upon amount of all development costs accumulated up to the point of exercising their opt-in right, after which development costs incurred and product revenue worldwide would be split equally.
Currently, KKC is not participating in the development of Bard in CTD-PAH, ADPKD, or other rare kidney diseases but is reimbursingreimbursed us the majority of the costs for our registrational trialCARDINAL study in CKD caused by Alport syndromeJapan and is paying for the costs of a certain number of patients as the in-country caretaker in our FALCON study in Japan. The Company’sWe reduced our expenses were reduced by $0.0 million and $0.3 million for KKC’s share of the studyCARDINAL costs for the six months ended June 30, 2019. 2020 and 2019, respectively.
The following table summarizes our research and development expenses incurred:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended June 30 |
|
| Six Months Ended June 30 |
| ||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
|
| (unaudited; in thousands) |
|
| (unaudited; in thousands) |
| ||||||||||||||||||||||||||
Bardoxolone methyl |
| $ | 10,713 |
|
| $ | 11,266 |
|
| $ | 19,393 |
|
| $ | 21,056 |
|
| $ | 9,736 |
|
| $ | 10,713 |
|
| $ | 23,653 |
|
| $ | 19,393 |
|
Omaveloxolone |
| $ | 5,676 |
|
|
| 4,707 |
|
|
| 11,479 |
|
|
| 7,288 |
|
|
| 8,313 |
|
|
| 5,676 |
|
|
| 14,942 |
|
|
| 11,479 |
|
RTA 901 |
| $ | 719 |
|
|
| (117 | ) |
|
| 1,055 |
|
|
| 266 |
|
|
| 750 |
|
|
| 719 |
|
|
| 1,961 |
|
|
| 1,055 |
|
RTA 1701 |
| $ | 653 |
|
|
| 542 |
|
|
| 982 |
|
|
| 1,503 |
|
|
| 479 |
|
|
| 653 |
|
|
| 1,874 |
|
|
| 982 |
|
Other research and development expenses |
| $ | 11,793 |
|
|
| 7,031 |
|
|
| 22,759 |
|
|
| 14,722 |
|
|
| 17,505 |
|
|
| 11,793 |
|
|
| 42,006 |
|
|
| 22,759 |
|
Total research and development expenses |
| $ | 29,554 |
|
| $ | 23,429 |
|
| $ | 55,668 |
|
| $ | 44,835 |
|
| $ | 36,783 |
|
| $ | 29,554 |
|
| $ | 84,436 |
|
| $ | 55,668 |
|
21
The program-specific expenses summarized in the table above include costs that we directly allocate to our product candidates. Our other research and development expenses include research and development salaries, benefits, stock-based compensation and preclinical, research, and discovery costs, which we do not allocate on a program-specific basis.
General and Administrative Expenses
General and administrative expenses consist primarily of employee-related expenses for executive, operational, finance, legal, compliance, and human resource functions. Other general and administrative expenses include personnel expense, facility-related costs, professional fees, accounting and legal services, depreciation expense, other external services, and expenses associated with obtaining and maintaining our intellectual property rights.
We anticipate that our general and administrative expenses will increase in the future as we increaseprepare for our headcount to support our continued research and development and potential commercialization of our product candidates. We have also incurred, and anticipate incurring in the future, increased expenses associated with being a public company, including exchange listing and SEC requirements, director and officer insurance premium, legal, audit and tax fees, compliance with the Sarbanes-Oxley Act, regulatory compliance programs, and investor relations costs. Additionally, if and when we believe the first regulatory approval of one of our product candidates appears likely, we anticipate an increase in payroll and related expenses as a result of our preparation for commercial operations, especially for the sales and marketing of our product candidates.
Other Income (Expense), Net
Other income represents(expense) includes interest and gains earned on our cash and cash equivalents, which include money market funds.interest expense on term loans, amortization of debt issuance costs, imputed interest on long term payables, loss on extinguishment of debt, foreign currency exchange gains and losses, gains and losses on sales of assets, and non-cash interest expense on liability related to the sale of future royalties.
(Benefit from) Provision for Taxes on Income
Provision for taxes on income consists of net loss, taxed at federal tax rates and adjusted for certain permanent differences. We maintain a full valuation allowance against our net deferred tax assets. Changes in this valuation allowance also affect the tax provision.
22
Results of Operations
Comparison of the Three Months Ended June 30, 20192020 and 20182019 (unaudited)
The following table sets forth our results of operations for the three months ended June 30:
|
| 2019 |
|
| 2018 |
|
| Change $ |
|
| Change % |
|
| 2020 |
|
| 2019 |
|
| Change $ |
|
| Change % |
| ||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||
Collaboration revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License and milestone |
| $ | 7,813 |
|
| $ | 7,519 |
|
| $ | 294 |
|
|
| 4 |
|
| $ | 1,169 |
|
| $ | 7,813 |
|
| $ | (6,644 | ) |
|
| (85 | ) |
Other revenue |
|
| 20 |
|
|
| 52 |
|
|
| (32 | ) |
|
| (62 | ) |
|
| 1,904 |
|
|
| 20 |
|
|
| 1,884 |
|
| ** |
| |
Total collaboration revenue |
|
| 7,833 |
|
|
| 7,571 |
|
|
| 262 |
|
|
| 3 |
|
|
| 3,073 |
|
|
| 7,833 |
|
|
| (4,760 | ) |
|
| (61 | ) |
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
| 29,554 |
|
|
| 23,429 |
|
|
| 6,125 |
|
|
| 26 |
|
|
| 36,783 |
|
|
| 29,554 |
|
|
| 7,229 |
|
|
| 24 |
|
General and administrative |
|
| 11,706 |
|
|
| 10,689 |
|
|
| 1,017 |
|
|
| 10 |
|
|
| 16,600 |
|
|
| 11,706 |
|
|
| 4,894 |
|
|
| 42 |
|
Depreciation |
|
| 232 |
|
|
| 105 |
|
|
| 127 |
|
|
| 121 |
|
|
| 284 |
|
|
| 232 |
|
|
| 52 |
|
|
| 22 |
|
Total expenses |
|
| 41,492 |
|
|
| 34,223 |
|
|
| 7,269 |
|
|
| 21 |
|
|
| 53,667 |
|
|
| 41,492 |
|
|
| 12,175 |
|
|
| 29 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment income |
|
| 1,705 |
|
|
| 357 |
|
|
| 1,348 |
|
|
| 378 |
| ||||||||||||||||
Interest expense |
|
| (2,413 | ) |
|
| (903 | ) |
|
| (1,510 | ) |
|
| (167 | ) | ||||||||||||||||
Loss on extinguishment of debt |
|
| — |
|
|
| (1,007 | ) |
|
| 1,007 |
|
|
| 100 |
| ||||||||||||||||
Other income (expense) |
|
| 7 |
|
|
| — |
|
|
| 7 |
|
|
| 100 |
| ||||||||||||||||
Total other income (expense) |
|
| (701 | ) |
|
| (1,553 | ) |
|
| 852 |
|
|
| 55 |
| ||||||||||||||||
Other income (expense), net |
|
| (16,990 | ) |
|
| (701 | ) |
|
| (16,289 | ) |
| ** |
| |||||||||||||||||
Loss before taxes on income |
|
| (34,360 | ) |
|
| (28,205 | ) |
|
| (6,155 | ) |
|
| (22 | ) |
|
| (67,584 | ) |
|
| (34,360 | ) |
|
| (33,224 | ) |
|
| (97 | ) |
Provision for taxes on income |
|
| 20 |
|
|
| 6 |
|
|
| 14 |
|
|
| 233 |
| ||||||||||||||||
(Benefit from) provision for taxes on income |
|
| (3 | ) |
|
| 20 |
|
|
| (23 | ) |
|
| (115 | ) | ||||||||||||||||
Net loss |
| $ | (34,380 | ) |
| $ | (28,211 | ) |
| $ | (6,169 | ) |
|
| (22 | ) |
| $ | (67,581 | ) |
| $ | (34,380 | ) |
| $ | (33,201 | ) |
|
| (97 | ) |
** Percentage not meaningful |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collaboration Revenue
License and milestone revenue represented approximately 100%38% and 99%100% of total revenue for the three months ended June 30, 2020 and 2019, respectively, and 2018, respectively.consisted primarily of the recognition of deferred revenue. License and milestone revenue decreased by $6.6 million or 85% during the three months ended June 30, 2019, was consistent with2020, compared to the three months ended June 30, 2018.2019, primarily due to the Reacquisition Agreement in October 2019, which ended our performance obligations under the AbbVie Collaboration Agreement and resulted in the writing off of the related remaining deferred revenue balance, after which no further revenue was recognized. Total revenue of $1.2 million was recognized during the three months ended June 30, 2020 from deferred revenue related to the KKC Agreement.
Other revenue was immaterialincreased by $1.9 million for the three months ended June 30, 2019 and 2018.2020, compared to the three months ended June 30, 2019. The increase was primarily due to $1.6 million in revenue recognized for reimbursements of expenses from KKC.
The following table summarizes the sources of our revenue for the three months ended June 30:
|
| 2020 |
|
| 2019 |
| ||
|
| (in thousands) |
| |||||
License and milestone |
|
|
|
|
|
|
|
|
AbbVie Collaboration Agreement |
| $ | — |
|
| $ | 6,644 |
|
KKC Agreement |
|
| 1,169 |
|
|
| 1,169 |
|
Total license and milestone |
|
| 1,169 |
|
|
| 7,813 |
|
Other revenue |
|
| 1,904 |
|
|
| 20 |
|
Total collaboration revenue |
| $ | 3,073 |
|
| $ | 7,833 |
|
Expenses
The following table summarizes our expenses, as a percentage of total expenses, for the three months ended June 30:
|
| 2019 |
|
| 2018 |
| ||
|
| (in thousands) |
| |||||
License and milestone |
|
|
|
|
|
|
|
|
AbbVie collaboration agreement |
| $ | 6,644 |
|
| $ | 6,644 |
|
KKC agreement |
|
| 1,169 |
|
|
| 875 |
|
Total license and milestone |
|
| 7,813 |
|
|
| 7,519 |
|
Other revenue |
|
| 20 |
|
|
| 52 |
|
Total collaboration revenue |
| $ | 7,833 |
|
| $ | 7,571 |
|
|
| 2020 |
|
| % of Total Expenses |
|
| 2019 |
|
| % of Total Expenses |
|
| ||||
|
| (in thousands) |
|
| |||||||||||||
Research and development |
| $ | 36,783 |
|
|
| 68 | % |
| $ | 29,554 |
|
|
| 71 | % |
|
General and administrative |
|
| 16,600 |
|
|
| 31 | % |
|
| 11,706 |
|
|
| 28 | % |
|
Depreciation |
|
| 284 |
|
|
| 1 | % |
|
| 232 |
|
|
| 1 | % |
|
Total expenses |
| $ | 53,667 |
|
|
|
|
|
| $ | 41,492 |
|
|
|
|
|
|
23
Research and Development Expenses
Research and development expenses increased by $6.1$7.2 million, or 26%24%, for the three months ended June 30, 2019,2020, compared to the three months ended June 30, 2018.2019. The increase was primarily due to $2.8$8.5 million in increased personnel and equity compensationpersonnel-related expenses related to supportthe growth of our development activities and accelerated recognition of stock-based compensation expense from employees who entered into consulting agreements at the termination of employment; $1.6 million in increased medical affairs and other research activities, and $1.3 million caused by two components: increased manufacturing costs to support product registration and startup activities for FALCON and the extension trials for our registrational programs, which were offset by a decrease in clinical study expenses related to stopping the CATALYST study and its extension study; and $2.3 million in decreased clinical expenses due to fully enrolled and completed studies.medical affairs expenses.
Research and development expenses, as a percentage of total expenses, was 71%68% and 68%71% for the three months ended June 30, 20192020 and 2018,2019, respectively. The increasedecrease of 3% was primarily due to increaseda proportionately larger increase in general and administrative expenses, which includes personnel and equitystock-based compensation expenses and rent and office expenses to support growth in our development activities and increased medical affairscommercial readiness activities.
General and Administrative Expenses
General and administrative expenses increased by $1.0$4.9 million, or 10%42%, for the three months ended June 30, 2019,2020, compared to the three months ended June 30, 2018. 2019. The increase was primarily due to $2.6$6.1 million in increased personnel and equitystock-based compensation expenses, $1.3 million in increased rent and office expenses to support growth in our development activities, and $0.4 million in increased professional fees due to audit, legal, and tax-related services, offset by a decrease of $3.6$0.6 million due to sublicense feesin marketing and other expenses from the achievement of a KKC milestone in 2018.commercialization expenses.
General and administrative expenses, as a percentage of total expenses, was 28%31% and 31%28%, for the three months ended June 30, 20192020 and 2018,2019, respectively. The decreaseincrease of 3% was primarily due to decreased sublicense fees and other expenses related to the achievement of a KKC milestone in 2018 and to aproportionately larger increase in general and administrative expenses, compared to research and development activities.expenses.
InvestmentOther Income (Expense), Net
InvestmentOther income (expense), net increased by $1.3$16.3 million or 378%, for the three months ended June 30, 2019,2020, compared to the three months ended June 30, 2018,2019. The increase was primarily due to investment and$11.2 million from loss on debt extinguishment, $3.2 million of additional interest income earned on higher balances of cash and cash equivalents.
Interest Expense
Interest expense increased by $1.5 million, or 167%, for the three months ended June 30, 2019, comparedattributable to the three months ended June 30, 2018, due to increased interest charges associated with additional borrowings under our Restatedthe Term B Loan drawn in December 2019 and the payable due to collaborator related to the Reacquisition Agreement entered in June 2018.
24
October 2019, and $1.2 million in decreased investment income due to declining interest rates.
(Benefit from) Provision for Taxes on Income
Provision forBenefit from taxes on income was immaterial for the three months ended June 30, 20192020 and 2018.2019.
Comparison of the Six Months Ended June 30, 20192020 and 20182019 (unaudited)
The following table sets forth our results of operations for the six months ended June 30:
|
| 2019 |
|
| 2018 |
|
| Change $ |
|
| Change % |
|
| 2020 |
|
| 2019 |
|
| Change $ |
|
| Change % |
| ||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||
Collaboration revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License and milestone |
| $ | 15,539 |
|
| $ | 39,686 |
|
| $ | (24,147 | ) |
|
| (61 | ) |
| $ | 2,338 |
|
| $ | 15,539 |
|
| $ | (13,201 | ) |
|
| (85 | ) |
Other revenue |
|
| 64 |
|
|
| 276 |
|
|
| (212 | ) |
|
| (77 | ) |
|
| 2,088 |
|
|
| 64 |
|
|
| 2,024 |
|
| ** |
| |
Total collaboration revenue |
|
| 15,603 |
|
|
| 39,962 |
|
|
| (24,359 | ) |
|
| (61 | ) |
|
| 4,426 |
|
|
| 15,603 |
|
|
| (11,177 | ) |
|
| (72 | ) |
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
| 55,668 |
|
|
| 44,835 |
|
|
| 10,833 |
|
|
| 24 |
|
|
| 84,436 |
|
|
| 55,668 |
|
|
| 28,768 |
|
|
| 52 |
|
General and administrative |
|
| 21,744 |
|
|
| 17,317 |
|
|
| 4,427 |
|
|
| 26 |
|
|
| 37,387 |
|
|
| 21,744 |
|
|
| 15,643 |
|
|
| 72 |
|
Depreciation |
|
| 401 |
|
|
| 206 |
|
|
| 195 |
|
|
| 95 |
|
|
| 562 |
|
|
| 401 |
|
|
| 161 |
|
|
| 40 |
|
Total expenses |
|
| 77,813 |
|
|
| 62,358 |
|
|
| 15,455 |
|
|
| 25 |
|
|
| 122,385 |
|
|
| 77,813 |
|
|
| 44,572 |
|
|
| 57 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment income |
|
| 3,502 |
|
|
| 693 |
|
|
| 2,809 |
|
|
| 405 |
| ||||||||||||||||
Interest expense |
|
| (4,810 | ) |
|
| (1,413 | ) |
|
| (3,397 | ) |
|
| (240 | ) | ||||||||||||||||
Loss on extinguishment of debt |
|
| — |
|
|
| (1,007 | ) |
|
| 1,007 |
|
|
| 100 |
| ||||||||||||||||
Other income (expense) |
|
| 7 |
|
|
| — |
|
|
| 7 |
|
|
| 100 |
| ||||||||||||||||
Total other income (expense) |
|
| (1,301 | ) |
|
| (1,727 | ) |
|
| 426 |
|
|
| 25 |
| ||||||||||||||||
Other income (expense), net |
|
| (20,804 | ) |
|
| (1,301 | ) |
|
| (19,503 | ) |
| ** |
| |||||||||||||||||
Loss before taxes on income |
|
| (63,511 | ) |
|
| (24,123 | ) |
|
| (39,388 | ) |
|
| (163 | ) |
|
| (138,763 | ) |
|
| (63,511 | ) |
|
| (75,252 | ) |
|
| (118 | ) |
Provision for taxes on income |
|
| 23 |
|
|
| 6 |
|
|
| 17 |
|
|
| 283 |
| ||||||||||||||||
(Benefit from) provision for taxes on income |
|
| (22,243 | ) |
|
| 23 |
|
|
| (22,266 | ) |
| ** |
| |||||||||||||||||
Net loss |
| $ | (63,534 | ) |
| $ | (24,129 | ) |
| $ | (39,405 | ) |
|
| (163 | ) |
| $ | (116,520 | ) |
| $ | (63,534 | ) |
| $ | (52,986 | ) |
|
| (83 | ) |
** Percentage not meaningful |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collaboration Revenue
License and milestone revenue represented approximately 100%53% and 99%100% of total revenue for the six months ended June 30, 2020, and 2019, respectively, and 2018, respectively.consisted primarily of the recognition of deferred revenue. License and milestone revenue decreased by $24.1$13.2 million or 61%, for85% during the six months ended June 30, 2019,2020, compared to the six months ended June 30, 2018. The decrease was2019, primarily due to revenue recognized during 2018,the Reacquisition Agreement in October 2019, which was related to variable consideration that was includedended our performance obligations under the AbbVie Collaboration Agreement and resulted in the transaction price forwriting off of the related remaining deferred revenue balance, after which we did not have a similar eventno further revenue was recognized. Total revenue of $2.3 million was recognized during the six months ended June 30, 2019.2020 from deferred revenue related to the KKC Agreement.
Other revenue decreasedincreased by $0.2$2.0 million or 77%, duringfor the six months ended June 30, 2019,2020, compared to the six months ended June 30, 2018,2019. The increase was primarily due to a decrease$1.6 million in revenue recognized for reimbursements of expenses from KKC for expenses incurred.KKC.
The following table summarizes the sources of our revenue for the six months ended June 30:
|
| 2020 |
|
| 2019 |
| ||
|
| (in thousands) |
| |||||
License and milestone |
|
|
|
|
|
|
|
|
AbbVie Collaboration Agreement |
| $ | — |
|
| $ | 13,214 |
|
KKC Agreement |
|
| 2,338 |
|
|
| 2,325 |
|
Total license and milestone |
|
| 2,338 |
|
|
| 15,539 |
|
Other revenue |
|
| 2,088 |
|
|
| 64 |
|
Total collaboration revenue |
| $ | 4,426 |
|
| $ | 15,603 |
|
Expenses
The following table summarizes our expenses, as a percentage of total expenses, for the six months ended June 30:
|
| 2019 |
|
| 2018 |
| ||
|
| (in thousands) |
| |||||
License and milestone |
|
|
|
|
|
|
|
|
AbbVie collaboration agreement |
| $ | 13,214 |
|
| $ | 13,214 |
|
KKC agreement |
|
| 2,325 |
|
|
| 26,472 |
|
Total license and milestone |
|
| 15,539 |
|
|
| 39,686 |
|
Other revenue |
|
| 64 |
|
|
| 276 |
|
Total collaboration revenue |
| $ | 15,603 |
|
| $ | 39,962 |
|
|
| 2020 |
|
| % of Total Expenses |
|
| 2019 |
|
| % of Total Expenses |
| ||||
|
| (in thousands) |
| |||||||||||||
Research and development |
| $ | 84,436 |
|
|
| 69 | % |
| $ | 55,668 |
|
|
| 71 | % |
General and administrative |
|
| 37,387 |
|
|
| 30 | % |
|
| 21,744 |
|
|
| 28 | % |
Depreciation |
|
| 562 |
|
|
| 1 | % |
|
| 401 |
|
|
| 1 | % |
Total expenses |
| $ | 122,385 |
|
|
|
|
|
| $ | 77,813 |
|
|
|
|
|
25
Research and Development Expenses
Research and development expenses increased by $10.8$28.8 million, or 24%52%, for the six months ended June 30, 2019,2020, compared to the six months ended June 30, 2018. 2019. The increase was primarily due to $5.3$21.7 million in increased personnel and equity compensationpersonnel-related expenses related to supportthe growth of our development activities $2.5and accelerated recognition of stock-based compensation expense as a result of the death of an executive and employees who entered into consulting agreements at the termination of employment; $9.9 million in increased medical affairs and other research activities, and $2.8 million caused by two components: increased manufacturing costs to support product registration and startup activities for FALCONincreased clinical, clinical pharmacology, and the extension trials fortoxicity study expenses to support our registrational programs, as well as our RTA 901 and RTA 1701 programs, which were offset by a decrease in clinical study expenses related to stopping the CATALYST study and its extension study; and $2.7 million in decreased clinical expenses due to fully enrolledmedical affairs and completed studies.research expenses.
Research and development expenses, as a percentage of total expenses, was comparable to the prior period at 72%69% and 71% for the six months ended June 30, 2020 and 2019, respectively. The decrease of 2% was primarily due to a proportionately larger increase in general and 2018.administrative expenses, which includes personnel and stock-based compensation expenses and rent and office expenses to support growth in our development and commercial readiness activities.
General and Administrative Expenses
General and administrative expenses increased by $4.4$15.6 million, or 26%72%, for the six months ended June 30, 2019,2020, compared to the six months ended June 30, 2018. 2019. The increase was primarily due to $5.0$14.2 million in increased personnel and equitystock-based compensation expenses, $2.0$0.6 million in increased rent and officeinsurance expenses, to support growth in our development activities, and $0.5 million in increased professional fees due to audit, legal,marketing and tax-related services, offset by decreased sublicense fees and other expenses related to the achievement of a KKC milestone in 2018.commercialization expenses.
General and administrative expenses, as a percentage of total expenses, was comparable to the prior period at30% and 28% for the six months ended June 30, 2019 and 2018.
Investment Income
Investment income increased by $2.8 million, or 405%, for the six months ended June 30, 2020 and 2019, respectively. The increase of 2% was primarily due to a proportionately larger increase in general and administrative expenses, compared to research and development expenses.
Other Income (Expense), Net
Other income (expense), net increased by $19.5 million for the six months ended June 30, 2020, compared to the six months ended June 30, 2018,2019. The increase was primarily due to $11.2 million from loss on debt extinguishment, $6.7 million of additional interest expense attributable to additional borrowings under the Term B Loan drawn in December 2019 and the payable due to collaborator related to the Reacquisition Agreement in October 2019,and $1.0 million in decreased investment andincome due to declining interest income earnedrates.
(Benefit from) Provision for Taxes on higher balances of cash and cash equivalents.Income
Interest Expense
Interest expenseBenefit from taxes on income increased by $3.4$22.2 million or 240%, for the six months ended June 30, 2019,2020, compared to the six months ended June 30, 2018,2019. The increase was primarily due to increased interest charges associated with additional borrowingsa tax refund we have filed for under our Restated Loan Agreement entered in June 2018.
Provision for Taxes on Income
Provision for taxes on income was immaterial for the six months ended June 30, 2019 and 2018.
Cash-based Operating Expenses (non-GAAP) forprovisions of the Three and Six Months Ended June 30, 2019 and 2018 (unaudited)
Total expenses (GAAP) were $41.5 million and $77.8 million for the three and six months ended June 30, 2019, respectively, compared to $34.2 million and $62.4 million for the three and six months ended June 30, 2018, respectively. Our cash-based operating expenses (a non-GAAP measure calculated as total expenses, less stock-based compensation expense and depreciation expense) were $36.8 million and $68.7 million for the three and six months ended June 30, 2019, respectively, compared to $31.6 million and $57.1 million for the three and six months ended June 30, 2018, respectively.
We expect our cash-based operating expenses to continue to increase in the future as we advance Bard and Omav through ongoing and future clinical trials, scale manufacturing for registrational and validation purposes, advance other product candidates into mid and later stage clinical trials, expand our product candidate portfolio, increase both our research and development and administrative personnel, and plan for commercialization of our product candidates.
26
We believe cash-based operating expenses, in addition to GAAP financial measures, provides a meaningful measure of our ongoing business and operating performance, by allowing investors to analyze our financial results similarly to how management analyzes our financial results by viewing period expense totals more indicative of effort directly expended to advance the business and our product candidates. The table below reconciles cash-based operating expenses to total expenses as reported on the Unaudited Consolidated Statements of Operations:
|
| 2019 |
|
| 2018 |
| ||||||||||||||||||
|
| June 30 |
|
| March 31 |
|
| December 31 |
|
| September 30 |
|
| June 30 |
|
| March 31 |
| ||||||
|
| (in thousands) |
| |||||||||||||||||||||
Total expenses - GAAP |
| $ | 41,492 |
|
| $ | 36,322 |
|
| $ | 33,373 |
|
| $ | 34,735 |
|
| $ | 34,223 |
|
| $ | 28,136 |
|
Stock-based compensation expense |
|
| (4,483 | ) |
|
| (4,227 | ) |
|
| (2,768 | ) |
|
| (2,745 | ) |
|
| (2,552 | ) |
|
| (2,485 | ) |
Depreciation |
|
| (232 | ) |
|
| (170 | ) |
|
| (120 | ) |
|
| (105 | ) |
|
| (105 | ) |
|
| (101 | ) |
Cash-based operating expenses - Non-GAAP |
| $ | 36,777 |
|
| $ | 31,925 |
|
| $ | 30,485 |
|
| $ | 31,885 |
|
| $ | 31,566 |
|
| $ | 25,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change from previous quarter |
| $ | 4,852 |
|
| $ | 1,440 |
|
| $ | (1,400 | ) |
| $ | 319 |
|
| $ | 6,016 |
|
| $ | 961 |
|
Percentage change from previous quarter |
|
| 15 | % |
|
| 5 | % |
|
| -4 | % |
|
| 1 | % |
|
| 24 | % |
|
| 4 | % |
For additional information about our non-GAAP financial measure, see “Non-GAAP Financial Measure” in Item 2.
CARES Act.
Liquidity and Capital Resources
Since our inception, we have funded our operations primarily through collaboration and license agreements, the sale of preferred and common stock, secured loans, and secured loans.the sale of future royalties. Through June 30, 2019,2020, we have raised gross cash proceeds of $476.6 million through the sale of convertible preferred stock and $780.0 million from payments under license and collaboration agreements. We also obtained $402.3$944.7 million in net proceeds from our IPOinitial public offering, follow-on offerings, and follow-on offeringsthe sale of our Class A common stock under the Purchase Agreement, and $77.2$299.0 million in net proceeds from the sale of future royalties under the Development Agreement. We also obtained $151.6 million in net proceeds from our Amended Restated Loan Agreement.Agreement, which we paid off in June 2020. We have not generated any revenue from the sale of any products. As of June 30, 2019,2020, we had available cash and cash equivalents of approximately $280.4$610.4 million. Our cash and cash equivalents are invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.
Cash Flows
The following table sets forth the primary sources and uses of cash for each of the six months ended June 30 (unaudited):30:
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
Net cash (used in) provided by: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
| $ | (61,441 | ) |
| $ | (49,428 | ) |
| $ | (237,107 | ) |
| $ | (61,441 | ) |
Investing activities |
|
| (2,092 | ) |
|
| (268 | ) |
|
| (384 | ) |
|
| (2,092 | ) |
Financing activities |
|
| 6,192 |
|
|
| 58,592 |
|
|
| 183,586 |
|
|
| 6,192 |
|
Net change in cash and cash equivalents |
| $ | (57,341 | ) |
| $ | 8,896 |
|
| $ | (53,905 | ) |
| $ | (57,341 | ) |
27Operating Activities
Net cash used in operating activities was $237.1 million for the six months ended June 30, 2020, consisting primarily of a net loss of $116.5 million adjusted for non-cash items including stock-based compensation expense of $34.1 million, loss on extinguishment of debt of $11.2 million, depreciation and amortization expense of $4.7 million, and a net increase in operating assets and liabilities of $171.3 million. The significant items in the change in operating assets that impacted our use of cash in operations were an increase in income tax receivable of $22.2 million and a decrease in payable to collaborators of $150.0 million for a payment made on June 30, 2020 under the Reacquisition Agreement.
Operating Activities
Net cash used in operating activities was $61.4 million for the six months ended June 30, 2019, consisting primarily of a net loss of $63.5 million adjusted for non-cash items including stock-based compensation expense of $8.7 million, depreciation and amortization expense of $1.1 million, and a net decrease in operating assets and liabilities of $7.7 million. The significant items in the change in operating assets that impacted our use of cash in operations include increases in accrued direct research and other current and long-term liabilities of $9.8 million due to activities related to clinical trials and personnel-related activities, an increase in prepaid expenses and other current assets of $3.2 million due to increases in prepaid subscriptions and insurance premiums, and decreases in amounts earned or due from collaboration agreements of $0.9 million and deferred revenue of $15.5 million. The decrease in deferred revenue is due to the ratable recognition of revenue over the expected term of the performance obligations under our collaboration agreements with AbbVie and KKC, which resulted in recognition of $15.5 million of license and milestone revenue.
Net cash used in operating activities was $49.4 million for the six months ended June 30, 2018, consisting primarily of net loss of $24.1 million adjusted for non-cash items including stock-based compensation expense of $5.0 million, depreciation and amortization expense of $0.4 million, loss on extinguishment of debt of $1.0 million and a net increase in operating assets and liabilities of $31.7 million. The significant items in the change in operating assets and liabilities include an increase in receivables from collaboration arrangements, prepaid expenses, other current assets, and other assets of $30.4 million primarily due to receivables from collaboration arrangements related to achievement of the KKC milestone, an increase in accrued direct research and other current and long-term liabilities of $8.3 million due clinical trial activities and sublicense fees and other expenses related to the KKC milestone, and a decrease in deferred revenue of $9.7 million. The decrease in deferred revenue is due to the ratable recognition of revenue over the expected term of the performance obligations under our collaboration agreements with AbbVie and KKC, which resulted in recognition of $39.7 million of license and milestone revenue.
Investing Activities
Net cash used in investing activities of $0.4 million and $2.1 million for the six months ended June 30, 2020 and 2019, respectively, were primarily due to capital expenditures in connection with an expansion of our office space and purchase of property and equipment.
Net cash used in investing activities for the six months ended June 30, 2018 was not significant.
Financing Activities
Net cash provided by financing activities ofwas $183.6 million for the six months ended June 30, 2020, primarily due to $55.4 million and $293.6 million in funding received from the Purchase Agreement and Development Agreement with BXLS, respectively, and $1.8 million from options exercised, offset by $167.2 million to pay off our Term Loans.
Net cash provided by financing activities was $6.2 million for the six months ended June 30, 2019, were primarily due to option exercises.
Net cash provided by financing activities was $58.6 million, primarily due to net proceeds of $57.8 million from our Restated Loan Agreement for the six months ended June 30, 2018.
Operating Capital Requirements
To date, we have not generated any revenue from product sales. We do not know when or whether we will generate any revenue from product sales. We do not expect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize one or more of our current or future product candidates. We anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products. We are subject to all the risks related to the development and commercialization of novel therapeutics, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. We continue to incur additional costs associated with operating as a public company. We anticipate that we will need substantial additional funding in connection with our continuing operations.
28
On June 24, 2020, we closed on the Development Agreement and Purchase Agreement, each dated June 10, 2020, under which certain Blackstone entities paid us an aggregate of $350.0 million in exchange for future royalties on bardoxolone and an aggregate of 340,793 shares of our Class A common stock at $146.72 per share.
On June 14, 2018,24, 2020, we amendedpaid off our Term Loans with Oxford Finance LLC and restatedSilicon Valley Bank, which included payments for principal of $155.0 million, prepayment fees of $5.4 million, exit fees of $6.7 million, and accrued and unpaid interest of $1.0 million.
On March 27, 2020, the United States enacted the CARES Act. Under its provisions, for the six months ended June 30, 2020, we recognized a tax benefit and receivable of $22.1 million associated with the ability to carryback an applicable prior year’s net operating losses to a preceding year to generate a refund.
On November 18, 2019, we closed a follow-on underwritten public offering of 2,760,000 shares of our LoanClass A common stock for gross proceeds of $505.1 million. Net proceeds to us from the offering were approximately $491.9 million, after deducting underwriting discounts and commissions and offering expenses.
On October 15, 2019, we entered into the Lease Agreement, relating to the lease of approximately 327,400 square feet of office and laboratory space located in Plano, Texas. The term of the Lease is estimated to commence mid-2022, when construction is completed, and continue for 16 years, with up to 10 years of extension at our option. The initial annual base rent will be determined based on the project cost, subject to an initial annual cap of approximately $13.3 million, which may increase in certain circumstances. Beginning in the third lease year, the base rent will increase 1.95% per annum each year. In addition to the annual base rent, we will pay for taxes, insurance, utilities, operating expenses, assessments under private covenants, maintenance and repairs, certain capital repairs and replacements, and building management fees.
On October 9, 2019, we and AbbVie entered into the Reacquisition Agreement pursuant to which we reacquired the development, manufacturing, and commercialization rights concerning our proprietary Nrf2 activator product platform originally licensed to AbbVie in the AbbVie License Agreement and the AbbVie Collaboration Agreement. Under our Restated Loan Agreement, the Term A Loan was increased from $20.0 million to $80.0In exchange for such rights, we will pay AbbVie $330.0 million, of which Reata borrowed an additional $60.0$100.0 million on June 14, 2018, which resulted in an outstanding principal balancewas paid as of $80.0 million under the Term A Loan at June 14, 2018. We may, at our sole discretion, borrow an additional $45.0 million under the Term B Loan within 30 days, but no later than December 31, 2019, after the achievement,$150.0 million was paid on June 30, 2020, and $80.0 million is payable on November 30,
2021. We will also pay AbbVie an escalating, low single-digit royalty on worldwide net sales, on a product-by-product basis, of oneomaveloxolone and an identified list of two milestones. If we borrow under the Term B Loan, we expect to incur additional related interest expense.certain next-generation Nrf2 activators. The termination of our deferred revenue balance will not have an impact on our cash flow.
In November 2017, the Companywe entered into an at-the-market equity offering sales agreement with Stifel, Nicolaus & Company, Incorporated, that established a program pursuant to which theyit may offer and sell up to $50.0 million of ourits Class A common stock from time to time in at-the-market transactions as statedtransactions. In November 2019, we suspended the program in the prospectus supplement filedconnection with the SEC pursuant to Rule 424(b)(5), dated as of November 9, 2017.2019 equity offering, which remains suspended until we notify Stifel otherwise. To date, no sales have been made under the Company’sour at-the-market offering program.
On July 27, 2018, the Company closed a follow-on underwritten public offering of 3,450,000 shares of its Class A common stock for gross proceeds of $248.4 million. Net proceeds to the Company from the offering were approximately $232.9 million, after deducting underwriting discounts and commissions and offering expenses.
Our longer term liquidity requirements will require us to raise additional capital, such as through additional equity, debt, or debt financings.royalty financings or collaboration arrangements. Our future capital requirements will depend on many factors, including the receipt of milestones under our current collaboration agreementsKKC Agreement and the timing of our expenditures related to clinical trials. We believe our existing cash and cash equivalents combined with available future debt, will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into 2021.operations through the end of 2023. However, we anticipate opportunistically raising additional capital before that time through equity offerings, collaboration or license agreements, or additional debt, or royalty financings in order to maintain adequate capital reserves. In addition, we may choose to raise additional capital at any time for the further development of our existing product candidates and may also need to raise additional funds sooner to pursue other development activities related to additional product candidates. Decisions about the timing or nature of any financing will be based on, among other things, our perception of our liquidity and of the market opportunity to raise equity, debt, or debt.royalty financing. Additional securities may include common stock, preferred stock, or debt securities. We may explore strategic collaborations or license arrangements for certainany of our earlier stage assets, including RTA 901 and RTA 1701.product candidates. If we do explore any arrangements, there can be no assurance that any agreement will be reached, and we may determine to cease exploring a potential transaction for any or all of the assets at any time. If an agreement is reached, there can be no assurance that any such transaction would provide us with a material amount of additional capital resources.
Until we can generate a sufficient amount of revenue from our product candidates, if ever, we expect to finance future cash needs through public or private equity or debt offerings, commercial loans, royalty financings, and collaboration or license transactions. The outbreak of COVID-19 has caused significant disruption of global financial markets, which may reduce our ability to access capital, which could negatively affect our liquidity. Additional capital may not be available on reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back, or discontinue the development or commercialization of one or more of our product candidates. If we raise additional funds through the issuance of additional equity or debt securities, it could result in dilution to our existing stockholders or increased fixed payment obligations, and any such securities may have rights senior to those of our common stock. If we incur indebtedness or obtain royalty financing, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell, or license intellectual property rights, and other operating restrictions that could adversely affect our ability to conduct our business, and any such debt or royalty financing could be secured by some or all of our assets. Any of these events could significantly harm our business, financial condition, and prospects. For a description of the numerous risks and uncertainties associated with product development and raising additional capital, see “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2018.2019and in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, under “Part II, Item 1A. Risk Factors.”
Our forecast of the period through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Our future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to:
| • | the scope, rate of progress, results, and cost of our clinical trials, preclinical testing, and other activities related to the development of our product candidates; |
| • | the number and characteristics of product candidates that we pursue; |
29
| • | the costs of development efforts for our product candidates that are not subject to reimbursement from our |
| • | the costs necessary to obtain regulatory approvals, if any, for our product candidates in the United States and other jurisdictions, and the costs of post-marketing studies that could be required by regulatory authorities in jurisdictions where approval is obtained; |
| • | the continuation of our existing |
| • | the time and unreimbursed costs necessary to commercialize products in territories in which our product candidates are approved for sale; |
| • | the revenue from any future sales of our products for which we are entitled to a profit share, royalties, and milestones; |
| • | the level of reimbursement or third-party payor pricing available to our products; |
| • | the costs of obtaining third-party commercial supplies of our products, if any, manufactured in accordance with regulatory requirements; |
| • | the costs associated with any potential loss or corruption of our information or data in a cyberattack on our computer systems or those of our suppliers, vendors, or collaborators who store or transmit our data; |
• | the costs associated with being a public company; |
• | any additional costs we incur associated with the COVID-19 pandemic; and |
| • | the costs we incur in the filing, prosecution, maintenance, and defense of our patent portfolio and other intellectual property rights. |
If we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, financial condition, and results of operations could be materially adversely affected.
Contractual Obligations and Commitments
As of June 30, 2019,2020, there have been no material changes, outside of the ordinary course of business, in our outstanding contractual obligations from those disclosed within “Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations”, as contained in our Annual Report on Form 10-K for year ended December 31, 2018.2019, except for those discussed below.
Below are our contractual obligations as of June 30, 20192020 (unaudited):
|
| Payments due by period |
|
| Payments due by period |
| ||||||||||||||||||||||||||
|
| Less than 1 year |
|
| 1 to 3 years |
|
| 4 to 5 years |
|
| Total |
|
| Less than 1 year |
|
| 1 to 3 years |
|
| 4 to 5 years |
|
| Total |
| ||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||
Operating lease obligations |
| $ | 3,022 |
|
| $ | 3,454 |
|
| $ | — |
|
| $ | 6,476 |
|
| $ | 3,787 |
|
| $ | 5,918 |
|
| $ | — |
|
| $ | 9,705 |
|
Outstanding secured term loan |
|
| — |
|
|
| 55,556 |
|
|
| 24,444 |
|
|
| 80,000 |
| ||||||||||||||||
Payable to collaborators |
|
| — |
|
|
| 80,000 |
|
|
| — |
|
|
| 80,000 |
| ||||||||||||||||
Total contractual obligations |
| $ | 3,022 |
|
| $ | 59,010 |
|
| $ | 24,444 |
|
| $ | 86,476 |
|
| $ | 3,787 |
|
| $ | 85,918 |
|
| $ | — |
|
| $ | 89,705 |
|
(1) | Total minimum future lease payments for the Plano build-to-suit lease have not commenced as of June 30, 2020. Therefore, such payments are not included in the consolidated financial statement, as we do not yet control the underlying assets. The lease is expected to commence mid-2022 with initial lease term of 16 years. |
The terms of the Development Agreement require us to pay potential future royalty payments based on product development success. The above table excludes such obligations as the amount and timing of such obligations are unknown or uncertain, which are further described in Note 5, Liability Related to Sale of Future Royalties, to Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.
Clinical Trials
As of June 30, 2019,2020, we have several on-going clinical trials in various stages. Under agreements with various CROs and clinical trial sites, we incur expenses related to clinical trials of our product candidates and potential other clinical candidates. The timing and amounts of these disbursements are contingent upon the achievement of certain milestones, patient enrollment, and services rendered or as expenses are incurred by the CROs or clinical trial sites. Therefore, we cannot estimate the potential timing and amount of these payments, and they have been excluded from the table above.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets
30
and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, accrued research and development expenses, income taxes, and stock-based compensation. We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Our significant accounting policies are described in Note 2 of Part I, Item 1 of this Quarterly Report on Form 10-Q and in Part I, Item 7, “Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2018.2019. During the quarterthree months ended March 31, 2019June 30, 2020, we adopted Topic 842.entered into the Development Agreement with an affiliate of BXLS. As a result, we recorded a liability related to sale of this adoption, we updatedfuture royalties that are based on our Leases policies.current estimate of future royalties expected to be paid over the estimated term of the Development Agreement and non-cash interest expense over the estimated term of the Development Agreement. There have been no other changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31, 2018.2019.
Off-Balance Sheet Arrangements
Since our inception, we have not had any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements, and we have not engaged in any other off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements, please see Note 2 of Notes to Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.
Non-GAAP Financial Measures
In addition to the U.S. GAAP financial measures, this Quarterly Report on Form 10-Q includes cash-based operating expenses, a non-GAAP financial measure, which the Company defines as total expenses excluding stock-based compensation expense and depreciation expense. A reconciliation of this non-GAAP financial measure to its most directly comparable U.S. GAAP financial measure is included in “—Results of Operations—Cash-based Operating Expenses (non-GAAP) for the three and six months ended June 30, 2019” above.
Non-GAAP financial measures should be considered in addition to, not in isolation or as a substitute for, U.S. GAAP financial measures. In addition, our non-GAAP financial measure may differ from similarly named measures used by other companies. You should carefully evaluate our non-GAAP financial measure, the adjustments included in our non-GAAP financial measure and the reasons we consider it appropriate for analysis supplemental to our GAAP information. This non-GAAP financial measure has important limitations as an analytical tool due to the exclusion of some but not all items that affect the most directly comparable GAAP financial measure.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks in the ordinary course of our business. These market risks are principally limited to interest rate fluctuations. We had cash and cash equivalents of $280.4$610.4 million at June 30, 2019,2020, consisting primarily of funds in operating cash accounts. The primary objective of our investment activities is to preserve principal and liquidity while maximizing income without significantly increasing risk. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of our investment portfolio, we do not believe an immediate increase of 100 basis points in interest rates would have a material effect on the fair market value of our portfolio, and accordingly we do not expect a sudden change in market interest rates to affect materially our operating results or cash flows.
We also have interest rate exposure as a result of our Term A Loan. As of June 30, 2019, the outstanding principal amount of our Term A Loan was $80.0 million. Our Term A Loan bears interest at a floating per annum rate calculated as 7.79% plus the greater of the 30-day U.S. Dollar LIBOR rate reported in The Wall Street Journal or 1.91%, with a minimum rate of 9.7% and a maximum rate of 12.29%. Changes in the U.S. Dollar LIBOR rate may therefore affect our interest expense associated with the Term A Loan. An increase of 100 basis points in
31
interest rates would increase expense by approximately $0.8 million annually based on the amounts currently outstanding and would not materially affect our results of operations.
We contract with research, development, and manufacturing organizations and investigational sites globally. Generally, these contracts are denominated in United States dollars. However, we may be subject to fluctuations in
foreign currency rates in connection with agreements not denominated in United States dollars. We do not hedge our foreign currency exchange rate risk.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2019.2020. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2019,2020, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f)15d-15(f) promulgated under the Exchange Act, during the three months ended June 30, 2019,2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently subject to any material legal proceedings.
Item 1A. Risk Factors.
In addition to other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors and other cautionary statements described under the heading “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2018,2019, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, which could materially affect our businesses, financial condition, or future results. Additional risks and uncertainties currently unknown to us, or that we currently deem to be immaterial, also may materially adversely affect our business, financial condition, or future results.
Our business and operations may be materially adversely affected There have been no material changes in our risk factors from those described in the event of computer system failures or security breaches.
DespiteAnnual Report on Form 10-K for the implementation of security measures, our internal computer systems,year ended December 31, 2019 and those of our CROs and other third partiesthe Quarterly Report on which we rely, are vulnerable to damage from computer viruses, unauthorized access, cyber-attacks, natural disasters, fire, terrorism, war, and telecommunication and electrical failures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example,Form 10-Q for the loss of clinical trial data from ongoing or planned clinical trials could result in delays in our regulatoryquarter ended March 31, 2020.
32
approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets or inappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees, access to our clinical data, or disruption of the manufacturing process, we could incur liability, the further development of our drug candidates could be delayed, and we may be subject to regulatory actions, including fines or other penalties. We may also be vulnerable to cyber-attacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidential information and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflict reputational harm upon us that may result in decreased market value and erode public trust.
We are increasingly dependent upon technology systems and data to operate our business. Our ability to effectively manage our business depends on the security, reliability and adequacy of our technology systems and data. Cyber-attacks are increasing in their frequency, sophistication and intensity, while also becoming increasingly difficult to detect. They are often carried out by motivated, well-resourced, skilled and persistent actors, including nation states, organized crime groups, “hacktivists” and employees or contractors acting with malicious intent. Cyber-attacks could include the deployment of harmful malware and key loggers, ransomware, a denial-of-service attack, a malicious website, the use of social engineering, impersonation, telephony and/or e-mail spear phishing, and other means to compromise the confidentiality, integrity and availability of our technology systems, data, and other corporate assets. E-mail fraud, including various types of business email compromise, may cause payments or information to be transmitted to unintended recipients. Cyber-attacks could also include supply chain attacks, which could cause delays in the manufacturing of our products or products produced for contract manufacturing. While we have not experienced a system failure, accident, cyber-attack or security breach that has resulted in a material loss of assets or operational capabilities to date, there can be no assurance that our efforts will prevent additional future cyber-attacks and/or security breaches in our systems that could materially and adversely affect our business, assets, or operations, even as we continue to strengthen the security posture of our infrastructure, systems, and corporate cybersecurity training. In addition, our liability insurance is not sufficient in type or amount to cover us against claims related to security breaches, cyber-attacks and other related incidents.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity SecuritiesNone, except as previously reported on a Current Report on Form 8-K.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
None.
33
Item 6. Exhibits.
Exhibit Number |
| Description |
|
|
|
|
| |
3.2 | ||
10.1* | First Amendment to Lease Agreement, dated as of May 27, 2020. | |
10.2†#* | ||
10.3†#* | ||
10.4+* | Fourth Amended and Restated Non-Employee Director Compensation Policy, dated as of June 10, 2020. | |
10.5+ | ||
|
|
|
31.1* |
| |
|
|
|
31.2* |
| |
|
|
|
32.1** |
| |
|
|
|
32.2** |
| |
|
|
|
101.INS* |
| Inline XBRL Instance Document |
|
|
|
101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document |
|
|
|
101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
101.LAB* |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |
* | Filed herewith. |
** | Furnished herewith. |
+ | Indicates management contract or compensatory plan. |
† | Certain exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished to the Securities and Exchange Commission upon request. |
# | Information in this exhibit identified by brackets is confidential and has been excluded pursuant to Item 601(b)(10)(iv) of Regulation S-K because it is not material and would likely cause competitive harm to the Company if publicly disclosed.An unredacted copy of this exhibit will be furnished to the Securities and Exchange Commission on a supplemental basis upon request. |
34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August | REATA PHARMACEUTICALS, INC. | ||
|
|
|
|
| By: |
| /s/ J. Warren Huff |
| Name: |
| J. Warren Huff |
| Title: |
| Chief Executive Officer and President |
| By: |
| /s/ |
| Name: |
|
|
| Title: |
| Chief Operating Officer, Chief Financial Officer, and Executive Vice President |
3537