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Edited Transcript of RETA earnings conference call or presentation 7-Nov-18 1:00pm GMT

Q3 2018 Reata Pharmaceuticals Inc Earnings Call

IRVING Nov 19, 2018 (Thomson StreetEvents) -- Edited Transcript of Reata Pharmaceuticals Inc earnings conference call or presentation Wednesday, November 7, 2018 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Colin J. Meyer

Reata Pharmaceuticals, Inc. - Chief Medical Officer & VP of Product Development

* J. Warren Huff

Reata Pharmaceuticals, Inc. - Chairman, CEO & President

* Jason D. Wilson

Reata Pharmaceuticals, Inc. - CFO & VP of Strategy

* Vineet R. Jindal

Reata Pharmaceuticals, Inc. - VP of Strategy

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Conference Call Participants

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* Adam Anderson Walsh

Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst

* Charles Cliff Duncan

Cantor Fitzgerald & Co., Research Division - Senior Analyst

* Dae Gon Ha

Leerink Partners LLC, Research Division - Associate

* Maurice Thomas Raycroft

Jefferies LLC, Research Division - Equity Analyst

* Yigal Dov Nochomovitz

Citigroup Inc, Research Division - Director

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Reata Third Quarter Financial Results and Update on Development Programs Conference Call. (Operator Instructions) An audio recording of today's webcast will be available shortly after the call today on Reata's website at reatapharma.com in the Investor & News section.

Before the company proceeds with its remarks, please note the forward-looking statement disclosure in the company's press release. The company will be making forward-looking statements on today's call. There are many factors that could cause results to differ from expectations, including those noted in the company's SEC filings.

Today's statements are not guarantees of future outcomes. Please also note that any comments made on today's call speak only as of today, November 7, 2018, and may no longer be accurate at the time of any webcast replay or transcript rereading. Following the prepared remarks, we will the open the call up for questions. (Operator Instructions)

I would now like to introduce your host for today's conference, Vinny Jindal, Vice President of Strategy. You may begin.

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Vineet R. Jindal, Reata Pharmaceuticals, Inc. - VP of Strategy [2]

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Thanks, Dimitrios. Hello, and welcome to Reata management's call to discuss our third quarter financial results and to provide a review of our development programs. This morning, we issued a press release with a summary of these results and the press release can be found on the Investors & News section of our website at reatapharma.com.

I'm joined today by our Chief Executive Officer, Warren Huff; our Chief Medical Officer, Colin Meyer; and our Chief Financial Officer, Jason Wilson. I will now turn the call over to Warren.

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J. Warren Huff, Reata Pharmaceuticals, Inc. - Chairman, CEO & President [3]

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Thanks, Vinny. Good morning, everyone, and thank you for joining us for our quarterly call.

I'll begin today's prepared remarks with a brief overview of our development programs and the progress that we've made in advancing our pipeline since the last quarterly call. After that, I'll turn the call over to Jason for a review of our financial results for the quarter.

As most of you know, Reata is conducting 3 ongoing pivotal studies, the CARDINAL study of bardoxolone in patients with Alport syndrome, the MOXIe study of omaveloxolone in patients with Friedreich's ataxia and the CATALYST study of bardoxolone in connective tissue disease associated PAH.

In addition, we're conducting the Phase II PHOENIX trial for bardoxolone in 4 additional rare forms of CKD, where renal inflammation and fibrosis are key drivers of kidney function loss and kidney failure that include ADPKD, IgA nephropathy, FSGS and CKD that's caused by type 1 diabetes.

In July, we announced 1-year data from the Phase II portion of the CARDINAL study as well as final results for the ADPKD cohort of the PHOENIX trial. Results from the Phase II portion of CARDINAL demonstrated a significant improvement in estimated GFR after 48 weeks of treatment with bardoxolone and a significant improvement in retained eGFR benefit at week 52 following 4 weeks of drug withdrawal.

To our knowledge, bardoxolone methyl is the first therapy to produce a retained eGFR benefit that's above baseline in a long-term CKD trial, and we believe that the retained benefit provides evidence that increases in estimated GFR observed with bardoxolone therapy may prevent or delay kidney failure in patients with Alport syndrome.

Turning to the PKD cohort of PHOENIX. We enrolled 31 patients and observed a statistically significant mean increase from baseline in estimated GFR of 9.3 ml per minute at week 12. Historic estimated GFR data from 29 of these patients demonstrated that their kidney function was declining at an average annual rate of 4.8 for 3 years prior to study entry. Based on these results and the historic correlation between estimated GFR increases at week 12 and retained estimated GFR benefit at 1 year, we announced plans to initiate a pivotal study for bardoxolone in PKD, which will begin in 2019.

In September, we announced positive final results for the IgA nephropathy in type 1 diabetic CKD cohorts of PHOENIX, which demonstrated that bardoxolone significantly increased estimated GFR at week 12 in both cohorts. We enrolled 26 patients in the IgA nephropathy cohort and observed a statistically significant mean increase from baseline in estimated GFR of 8 ml per minute at week 12. We enrolled 28 patients in the type 1 diabetic CKD cohort and observed a statistically significant mean increase from baseline in estimated GFR of 5.5 ml per minute at week 12.

Historically, 25% to 40% of the on-treatment estimated GFR benefit is retained at 1 year. Based on the magnitude of response we observed in these cohorts and the rate of estimated GFR loss that typically occurs in these patients, we intend to pursue both indications commercially.

Collectively, these studies demonstrated that bardoxolone improved kidney function across multiple forms of CKD in patients whose kidney function was declining while on standard of care and suggest that bardoxolone has the potential to delay or prevent dialysis in multiple forms of chronic kidney disease.

Regarding the ongoing Phase III CARDINAL study of bardoxolone in patients with Alport syndrome, I'm pleased to announce that this trial is fully enrolled and we're confirming our guidance that top line data from the study will be available in the second half of next year.

Turning to our second registrational program, we're studying omav, our second-generation Nrf2 activator, in the ongoing pivotal part 2 of the MOXIe trial in patients with Friedreich's ataxia. You may recall that the optimal dose in the dose ranging part of MOXIe, we observed a statistically significant improvement in the modified FARS scores of 3.8 points versus baseline at week 12 and a placebo-corrected improvement in modified FARS score of 2.3 points, which approach significance with a p-value of 0.06.

The primary endpoint for the pivotal part 2 of MOXIe is a placebo-corrected improvement in modified FARS of 1.2 points, roughly half of what we observed at the optimal dose in part 1. Based on the results of part 1 and the design of part 2 of MOXIe, we're optimistic that omav can become the first approved and effective therapy for patients with FA.

I'm also pleased to announce that the MOXIe trial is fully enrolled and we're confirming our guidance that top line data from this study will be available in the second half of next year.

Finally, the CATALYST study of bardoxolone in connective tissue disease associated pulmonary arterial hypertension is also proceeding as planned, and we continue to expect top line data from this study to be available in the first half of 2020.

Based on the results observed in our Phase II LARIAT trial and the design of the CATALYST trial, we're optimistic that bardoxolone will become the first therapy approved specifically for patients with CTD-PAH.

With that, I'll now turn the call over to Jason to provide a summary of the financial results for the quarter.

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Jason D. Wilson, Reata Pharmaceuticals, Inc. - CFO & VP of Strategy [4]

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Thanks, Warren, and good morning, everyone. As Warren noted, this morning, we reported the financial results for the third quarter of 2018. Net loss for the quarter was $30.8 million or $1.07 per share compared to a net loss of $12.3 million or $0.50 per share for the same period last year. The increased net loss for the 3 months period compared to prior year is driven both by an increase in expenses and decrease in revenue.

Regarding expenses, we incurred total expenses of $34.7 million for the quarter ended September 30, 2018 compared to $24.6 million for the same period last year. The higher expenses are primarily driven by an increase in R&D expenses due to clinical and manufacturing activities as we have continued development of our product pipeline and an increase in personnel expenses to support these expanded development activities.

The decrease in revenues was related to our license and collaboration agreements. As you probably know, much of our revenue has been related to recognition of deferred revenue from upfront payments from license and collaboration agreements entered into during 2009, 2010 and 2011. The upfront payments amounts from these agreements were recorded in the deferred revenue when received and then recognized as revenue during our performance obligation period.

In 2017, we finished recognizing revenue from an upfront payment received under a 2010 license agreement. So it is no longer included in our revenue in 2018.

In addition, during the first quarter of 2018, we implemented Topic 606 on revenue recognition, which substantially change the way that milestone payments are recognized and required some amount of the revenue be apportioned to the past. In the third quarter, we determined that we had overallocated revenue related to a milestone from KHK to the past, and we've adjusted the revenue and deferred revenue accounts reducing our third quarter revenue. This, of course, does not impact the payment of the KHK milestone, which was made and reflected in our cash balances in the third quarter.

On another note, in this quarter, we have added a non-GAAP measurement, cash-based operating expenses, which we define as total expenses, excluding stock-based compensation expense and amortization and depreciation expense. Our cash-based operating expenses were $31.9 million and $22.9 million for the 3 months ended September 30, 2018 and 2017, respectively. A reconciliation of this non-GAAP measure to total expenses is included in the press release issued this morning and can be found on the company's website at www.reatapharma.com under Investors & News subheading News & Events, subheading Press Releases.

We expect our cash-based operating expenses will continue to increase as we advance our product candidates into additional development, continue to grow the company and prepare for commercialization.

At September 30, 2018, we had approximately $375 million in cash and cash equivalents, and we believe our existing cash and cash equivalents will be sufficient to enable us to fund our operating expenses and capital expenditure requirements well past the data on our 3 registrational trials and into 2021.

With that, I'll turn the call back over to Warren.

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J. Warren Huff, Reata Pharmaceuticals, Inc. - Chairman, CEO & President [5]

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Thanks, Jason. 2018 has been a transformative year for the company. We reported Phase II data on our lead program for bardoxolone in Alport syndrome that helped sharpen our understanding of how patients in both the active treatment and placebo arms of the ongoing pivotal trial might behave.

We initiated, completed and reported positive data from 3 additional proof-of-concept Phase II studies in chronic kidney disease and began preparations to launch a pivotal trial in ADPKD.

Furthermore, in 2018, we completed enrollment in 2 parallel independent pivotal clinical trials in 2 distinct rare diseases, which represents a major achievement for our company.

Over the course of the next 18 months, we expect to generate significant news flow, including the full results from the FSGS cohort of PHOENIX in the first half of 2019, Phase I data for RTA 1701, a potent and selective modulator of ROR gamma T in the first half of 2019 and top line pivotal data from our registrational studies in Alport syndrome and Friedreich's ataxia in the second half of 2019.

With a strong balance sheet and a growing portfolio of ongoing pivotal programs, we are well positioned to produce positive Phase III data and commercialize one or more groundbreaking therapies for underserved orphan diseases in the coming years. We look forward to updating you again soon on our progress.

That concludes our prepared remarks. And so I'll now turn the call over to the operator for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from Yigal Nochomovitz with Citigroup.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [2]

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Warren and Colin, on the Phase II for ADPKD, is it the plan as with Alport to continue that study out to the 48-week time point and then check for retained benefit at 52 weeks? Or is that study going to stop as you move to the Phase III?

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Colin J. Meyer, Reata Pharmaceuticals, Inc. - Chief Medical Officer & VP of Product Development [3]

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Yigal, it's a good question. But the PHOENIX protocol is different than the CARDINAL protocol. The PHOENIX protocol, as you know, contains 4 independent sets of patients and the treatment duration is only 12 weeks. And so there is no retained benefit analysis, no extended duration of treatment. And as we mentioned, with PKD, we're planning to launch a pivotal trial in the upcoming year in 2019. And so we'll clarify the specific plans once we can, but we would anticipate that we would have obviously a longer duration study and assess retained benefit in that trial.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [4]

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Okay. So the Phase III design for ADPKD is, beyond saying a longer duration, at this point, you -- the details are pending?

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Colin J. Meyer, Reata Pharmaceuticals, Inc. - Chief Medical Officer & VP of Product Development [5]

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Yes, we would anticipate that any registrational trial will be longer than 12 weeks, and we'll provide more granular details when we can.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [6]

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Okay. And then given you've completed the enrollment in the Phase III part of the CARDINAL study, can you comment at all on how similar the baseline characteristics are for the 157 that have been enrolled relative to the Phase II part of CARDINAL?

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Colin J. Meyer, Reata Pharmaceuticals, Inc. - Chief Medical Officer & VP of Product Development [7]

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So I'll just say that the baseline characteristics are within our expectations and, obviously, consistent with the eligibility criteria. We'll plan to have a deep dive on those in the upcoming medical meeting.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [8]

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Okay. And where is your thinking with respect to potential for Phase IIIs in some of the other PHOENIX cohorts like IgA and type 1 diabetic CKD. Is that still in the cards? Or is the focus now on Alport and ADPKD?

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Colin J. Meyer, Reata Pharmaceuticals, Inc. - Chief Medical Officer & VP of Product Development [9]

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It's definitely in the cards. We've indicated that we plan to pursue the additional indications, IgA nephropathy and type 1 diabetic CKD as commercial indications. Obviously, we have 3 registrational trials underway right now. We're adding a fourth with PKD that will start next year. And we're now internally planning as to when best to launch additional pivotal trial.

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Operator [10]

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And our next question comes from Adam Walsh with Stifel.

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Adam Anderson Walsh, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst [11]

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I just have a quick one for Colin. Colin, at ASN, results from a couple of the patient populations in the PHOENIX trials showed a few cases of elevated liver enzymes as part of the AE profile. Could you maybe contextualize those findings for us, maybe remind us what was shown? And then what the liver safety history has been across the entire bardoxolone clinical trial experience?

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Colin J. Meyer, Reata Pharmaceuticals, Inc. - Chief Medical Officer & VP of Product Development [12]

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Sure, no problem, Adam. And so occasionally, we see elevations of ALT and AST. Notably, those transaminases are regulated by the targeted bardoxolone, which is Nrf2, and so it's a pharmacodynamic effect. We've seen it in prior trials. It follows a very distinct pattern clinically. The elevations typically occur fairly quickly after initiation of treatment. In the 2,000-plus patients we've treated with bardoxolone, there has never been a case of primary liver toxicity, never been a case of Hy's Law. Notably, in the BEACON trial, there were half as many hepatobiliary serious adverse events in the bardoxolone group relative to placebo and total bilirubin was actually reduced. And as you probably know, total bilirubin is the marker of liver function. And so we believe we actually see improved liver function. We've investigated the pharmacology of transaminases in depth. And I think we've had posters at medical meetings years ago. I think, most importantly, we've demonstrated in cell culture that upon administration of bardoxolone, there's increased production of transaminases. And in models of genetic manipulation of Nrf2, if you activate Nrf2, you increase production of transaminases. If you genetically knock out Nrf2, you reduce production of transaminases. And so the changes that we observed in our clinical trials actually have nothing to do, we think, with liver toxicity, and it's simply a pharmacodynamic effect. We do monitor them, of course, just to make sure that if there ever was going to be a potential case of liver toxicity, we don't miss it. But what we've seen in our clinical trials was consistent with a regulated effect. And once again, there is actually 0 evidence of liver toxicity in any of our clinical trials.

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Operator [13]

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And our next question comes from Maury Raycroft with Jefferies.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [14]

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First question is just, just wondering if you can provide perspective coming out of the ASN on KOL sentiment, particularly in respect to proteinuria or eGFR? And then how this relates to the different levels of proteinuria and eGFR rates decline that you see across the different cohorts in PHOENIX?

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Colin J. Meyer, Reata Pharmaceuticals, Inc. - Chief Medical Officer & VP of Product Development [15]

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Sure, Maury. And so I think that the KOLs have been very pleased with the data that we've produced. And so we now have data across many different forms of chronic kidney disease caused by, obviously, completely different etiologies that show a very consistent pattern. At ASN, we had 4 different clinical presentations. There's a lot of traffic to the presentations. People are now understanding that the profile is consistent with what we've seen before in diabetic CKD and is supported by over 40 peer-reviewed manuscripts that have elucidated the pharmacology in various animal models.

As far as some of your specific questions about proteinuria and eGFR, there has been a question as if -- is if the increase in GFR is due to something called hyperfiltration which, importantly, is a very specific effect of increased pressure in the kidney that may transiently increase GFR that ultimately within a period of just a few months cause injury and loss of GFR. We've shown very carefully in animal models that, that does not occur. The drug restores surface area that's constricted in the setting of inflammation, basically restoring or increasing GFR through a nondamaging pattern. We've now shown in several trials, including Alport syndrome in CARDINAL and diabetic CKD in the BEAM and BEACON trials, that the effect is durable for at least 1 year, and so -- and the magnitude is quite large. This is very distinct once again from a pattern of hyperfiltration. And importantly, we've shown retained benefit now in 3 different trials, including the CARDINAL Phase II trial that rules out harm to kidney and demonstrates disease-modifying activity. And so I think those data have been very helpful for the nephrology community to see that the mechanism is not damaging.

As far as proteinuria is concerned, that's often cited as potentially evidence that there is hyperfiltration, but our pattern is, once again, distinct from that. I think if you step back and think about the kidney and different forms of CKD, if there is damage to the filtration barrier because of the disease process and there is basically increase seeding of protein and the damage is present when a patient enters our clinical trial. If you increase GFR, you will simply increase filtration or seeding of protein. And so we do see that in our Alport syndrome trial, and we did see that in our diabetic -- or type 2 diabetic CKD trials.

Notably, the increase is accounted for by the change in GFR. And then after GFR is maximal, proteinuria is maximal, it actually trends down. And that was highlighted in our CARDINAL 1-year Phase II data at ASN. Some additional data that we released demonstrates that not only does overall proteinuria reduce over time and actually at the end of 1 year, it was not significantly different from baseline. Once the drug is withdrawn and washed out, what we have demonstrated is retained benefit on eGFR, proteinuria is actually no different than baseline. And new data that we released at ASN had demonstrated that in the patients who have the highest levels of proteinuria in our Phase II CARDINAL trial, those with macroalbuminuria upon entry who on average had about gram-level proteinuria, so pretty high, those patients also demonstrated an initial increase that was accounted for by the change in GFR. But the reduction that was observed was actually larger in those patients. While the patients were on drug at week 48, it was actually slightly below baseline. And so not up, but actually down numerically. And when patients came off drug and were washed out and once again were assessed for retained benefit on eGFR, those had 28% reduction in proteinuria in that subset. And so that's actually very meaningful. And so all in all, I think our profile is now something very distinct. We observed the same profile across many different forms of CKD. This profile is very distinct from what you would anticipate from pressure-mediated hyperfiltration and there is actually 0 evidence in our clinical data or in the preclinical data that our drug has that specific effect. It's very novel, restores surface area and the effects on GFR we've seen have been durable for the longest duration tested.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [16]

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Okay. That's very helpful. And just to -- just kind of a takeaway from that. So as far as proteinuria goes, you're really not limited to specific patient types based on either high proteinuria or low proteinuria at baseline?

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Colin J. Meyer, Reata Pharmaceuticals, Inc. - Chief Medical Officer & VP of Product Development [17]

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You're correct. I think that's one of our distinction from our program. And so -- and I guess to add a little bit more color on the preliminary discussion. So while in Alport syndrome and type 2 diabetic CKD, where patients had significant damage to the filtration barrier and we see this initial increase, in the other cohorts, in the other patients who were studied, we do not see an increase in proteinuria. And so in PKD, that's primarily disease of the tubules or cyst form, those patients have normal proteinuria upon study entry and bardoxolone did not cause an increase in proteinuria in those patients. Similarly in the IgA nephropathy patients, there is no increase in proteinuria. In the type 1 diabetic CKD patients, there is no increase in proteinuria. And so I think there is a very, once again, distinct effect on proteinuria that's dependent upon the baseline status. And since our -- and since proteinuria is really a surrogate of the surrogates, and so in FDA's mind, obviously, ideally they would prefer companies produce outcome status showing a difference in kidney transplant dialysis events. That's obviously not feasible, as they acknowledge, in rare forms of CKD. And so eGFR is now acceptable as a surrogate endpoint. Proteinuria is simply a marker of potential injury in patients and is a surrogate of eGFR change, which is a surrogate of outcomes. And since our drug has a primary effect on eGFR, that is the important endpoint for us in all of our trials. We don't have to limit our trials to patients with high levels of proteinuria. All the other trials that are ongoing in either IgA nephropathy or FSGS have to select for patients with high levels of proteinuria because those interventions reduce proteinuria, and they're trying to determine that, that reduction can then associate with an improvement in eGFR versus placebo.

For reference, in our IgA nephropathy trial in PHOENIX, of the 20-some patients who we enrolled, only a single patient had gram-level proteinuria and that's often the threshold. That's used for inclusion trials, and so I think in an unbiased manner when we simply enroll patients, you can see that numbers. Patients actually don't have extremely high levels of proteinuria, if they're being adequately cared for on standard of care.

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J. Warren Huff, Reata Pharmaceuticals, Inc. - Chairman, CEO & President [18]

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I think that's one of -- something that's not actually well appreciated across the nephrology community, and we kind of see it in the enrollment in our trials of -- they've done an excellent job of treating patients with standard of care ACE inhibitors and angiotensin receptor blockers and does have significantly reduced protein levels, yet patients are still chronically declining, and we see patients, as Colin mentioned, the vast majority in our trials have less than gram-level proteinuria, but have low GFRs and are headed to an ESRD event.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [19]

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Got it. Very helpful. Just one more quick question on Friedreich's ataxia. Just wondering if you can talk about just generally the patients in part 2 and how they compare to part 1? And I know that you're aiming for specific proportion of patients with the foot deformity, and if you can just comment on that as well.

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Colin J. Meyer, Reata Pharmaceuticals, Inc. - Chief Medical Officer & VP of Product Development [20]

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Sure. So I think very similar answer to the question about the CARDINAL Phase III population. So we'll disclose details of the baseline characteristics at a future medical meeting. As with all of our trials, we take in great care to make sure that we do enroll patients, who we think would be appropriate. And so we engineered in some requirements in caps to kind of make sure that the patient population would be similar to those we previously studied in part 1 of the trial. So for instance, patients with the foot deformity or pes cavus, there was a cap of 20% of patients, and so that cap was not exceeded.

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Operator [21]

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And our next question comes from Joseph Schwartz with Leerink Partners.

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Dae Gon Ha, Leerink Partners LLC, Research Division - Associate [22]

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This is Dae Gon dialing in for Joe. So I know it's early and you didn't really provide any specifics. Still I just wanted to see if I can attempt to gain a little more granularity on particularly your bard plans in the various renal CKD indications. So with regards to ADPKD with the pivotal trial initiating in 2019, just wondering based on the tolvaptan precedent and what you'd seen in CARDINAL, is it safe to assume that you're going to go all the way out to 48 weeks plus 4 weeks or something shorter than that? And the reason I'm asking that specific question is sort of related to the other, the PHOENIX cohorts wherein your 12 weeks have shown benefit, but in your previous experience, 12 weeks eGFR have shown some pretty good predictability out to 1 years out. So how are you thinking about for your PHOENIX cohorts in terms of trial duration? Do you necessarily need the 48-week plus 4-week retained benefit? Or can you go something shorter like 36 weeks like some of the other guys in the field are pursuing?

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Colin J. Meyer, Reata Pharmaceuticals, Inc. - Chief Medical Officer & VP of Product Development [23]

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Yes, so you are correct in that the eGFR change at 12 weeks has been predictable of the change at 1 year, on and off drug. I think, importantly, we believe that's sufficient to know if the drug is active in various type of CKD. Regulators have already kind of determined what the relevant duration is for approval. And despite a few trials having accelerated approval endpoints at 36 weeks, the full approval requires at least 2 years of treatment. And so if you look across any of the recent CKD trials, either ours in Alport syndrome or others in IgA or FSGS, the full approval will be determined by an eGFR-based endpoint at a minimum 2 years. And so from our perspective, we would anticipate that we would receive kind of a similar guidance to what we would have received before. And so 2-year trial with 1-year off treatment analysis, potentially for further approval at 1 year and then at 2 years for full approval. And so that's kind of our base case plan.

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J. Warren Huff, Reata Pharmaceuticals, Inc. - Chairman, CEO & President [24]

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I just -- I would just add too that we now have off-treatment data at 1 year in 2 diseases and in 3 clinical trials. We don't have off-treatment data at week 36. And so just from a predictability standpoint and study design standpoint, we would not want to deviate from that, even if it was possible to get it earlier. We would want to -- we know the 12-week data predicts, as you mentioned, on treatment and off treatment at 1 year. And so that's the way we would propose the study.

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Dae Gon Ha, Leerink Partners LLC, Research Division - Associate [25]

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Great. So just to follow up. With regards to the PHOENIX cohort, aside from the ADPKD plans, you haven't really laid out a time line for the IgAN or type 1 diabetic CKD. Are you basically waiting on the FSGS update in the first half '19 before you make your next plans? Or do you already have an end-of-Phase II meeting scheduled for those other indications to discuss?

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Colin J. Meyer, Reata Pharmaceuticals, Inc. - Chief Medical Officer & VP of Product Development [26]

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So we're not waiting on the FSGS data. We are simply trying to appropriately triage our opportunities based upon the current personnel and capital resources. And so as I mentioned, we have 3 ongoing pivotal trials, so the CARDINAL trial in Alport syndrome, the MOXIe trial in Friedreich's ataxia and the CATALYST trial in CTD-PAH. We're adding a fourth pivotal trial with ADPKD in 2019 and then we will need to layer on subsequent to both trials as appropriate. Obviously, we need to make sure that we execute and hopefully bring home positive data from our Phase III trials that are underway. As Warren mentioned, we will have data from the first 2 in the second half of next year. And so it's imperative that we bring those trials successfully and then, obviously, proceed as rapidly and efficiently as possible to NDA submission and commercial launch of those 2 drugs. So that's our top priority. And then these additional pivotal trials will be a secondary priority.

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J. Warren Huff, Reata Pharmaceuticals, Inc. - Chairman, CEO & President [27]

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It's just a question of sequencing.

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Operator [28]

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(Operator Instructions) And our next question comes from Charles Duncan with Cantor Fitzgerald.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [29]

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Most of my clinical questions have been asked. But I wanted to perhaps press the fast-forward button on something you just alluded to, and that is commercialization and go-to-market plan. It sounds like in about a year, you're going to be looking at pivotal data, not only in Alport's but also perhaps even Friedreich's ataxia and it seems like those are really 2 divergent prescriber bases. So surely you've given some thought, and I would like to hear any color you have on the go-to-market strategy? And then I wanted to ask a followup with regard to any recent interactions with old partner, AbbVie?

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J. Warren Huff, Reata Pharmaceuticals, Inc. - Chairman, CEO & President [30]

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Sure. And Charles, I'll take that. Yes, we're actively preparing for the launch of potentially both products, the initial CKD launch in Alport syndrome and also a virtual parallel launch in Friedreich's ataxia on the assumption that both studies could come out positively. They're both conservatively designed and have a very good probability of success. They're obviously in very different therapeutic areas, but both of them have similar characteristics in that they're rare orphan diseases currently with no approved therapy. Our endpoints are designed to show very meaningful clinical benefit to these patients. And in the Alport's case, the retained benefit, we believe, would support that the drug is having a disease-modifying effect in the disease. And in Friedreich's ataxia, there is data showing that the FARS score correlates very highly with activities of daily living, and therefore, would be a very meaningful clinical measure of improvement in those patients. So we're kind of laying the groundwork to data -- with the clinical trials to have data that would support potentially claims of disease-modifying therapy in a rare orphan disease with no approved therapy. We've also, I think you know, have been building our commercial function. This -- over last year and this year, Dawn Bir, who played a key role in launching IMBRUVICA, joined our team as Chief Commercial Officer. Last year, she's been building her team. During the year, we've also significantly expanded, particularly in CKD space, our medical affairs functions and you see that reflected in the expense increase that we've had year-over-year. A lot of that is related to manufacturing scale up, building out these additional functions and preparing for the commercial launch of the product. You also recall that with respect to bardoxolone in CKD, we've retained 100% of the commercial rights and the economics in the United States. We have a very active partner in Japan and Southeast Asia with Kyowa Hakko Kirin, and of course, they're actively preparing for the launch there. And AbbVie has a onetime option to elect in to commercialize those indications in the rest of the world territories outside of the United States and outside of the Kirin territories. And they will be presented with an election option when we have the Phase III data. And I think one of 3 things will happen along the way, which is, they will either elect in and launch the product commercially in those territories; they will return the rights to us, in which case we would either plan to launch in those territories or would have to add a substitute partner in those territories.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [31]

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That's helpful reminder, Warren. And it seems like given at least, well, in both Alport's and other kidney diseases as well as Friedreich's ataxia, the patient population is fairly well organized through advocacy community and differentiated clinical profile assumed out of bardoxolone and omaveloxolone. I guess, I'm wondering if you think that this could be a relatively reasonable size commercial effort in terms of number of people that could effectively market the drug?

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J. Warren Huff, Reata Pharmaceuticals, Inc. - Chairman, CEO & President [32]

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Yes, I mean, if you take Friedreich's ataxia, I think, we've commented before, but there is an extremely effective patient organization, FARA, very active in the disease there. This has been a disease with little hope. And I think -- we've been very engaged with them. There is an existing patient registry, they've done a fabulous job collecting long-term data. But just to say there is a very active patient group and a huge unmet need. It is a absolutely terrible disease. So the kind of top line analysis of that is, yes, we would be launching a drug with demonstrated efficacy with a robust clinical trial into a rare deadly disease with no approved therapy and currently has terrible outcomes. And similar for Alport syndrome. It's one of the most severe forms of CKD. There is no therapy specifically approved for it, although ACE inhibitors and ARBs are used off-label, but you can see from the data we presented in the Phase II, there were substantial average GFR declines in those populations that were a lot higher than we observed in diabetic CKD earlier. So those patients are at a high risk of progressing to kidney failure and the consequences of that. And so again, a rare deadly disease with no approved therapy. And you can draw your own conclusions about pricing and penetration, but we think it's very good, both of them are very good commercial opportunities for us.

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Operator [33]

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And we have a follow-up question from Yigal Nochomovitz with Citigroup.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [34]

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Just to press the conversation a little bit more on the AbbVie question. Could you just comment as to the potential advantages or disadvantages of the 2 scenarios you outlined, Warren? And is there an internal preference for whether you'd have prefer AbbVie to elect in or potentially have the opportunity to repartner it yourself?

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J. Warren Huff, Reata Pharmaceuticals, Inc. - Chairman, CEO & President [35]

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I don't think we could really say much more about it. I think AbbVie would be an excellent commercial partner. If they elected into the project, I'm sure they would do an excellent job of commercializing it in the offshore territories. At the same time, the other option of having the rights returned to us and giving us the option to either launch the product or we partner it would also be obviously extremely attractive to us. So from our standpoint, I think, we -- our primary goal is to make sure that the product gets launched on a timely basis and effectively in those territories, and there are a number of good options.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [36]

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And can you just remind us and everyone listening what the economics are, if they decide to opt in? Isn't there some monetary sum they have to pay to make -- to contribute to the development?

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J. Warren Huff, Reata Pharmaceuticals, Inc. - Chairman, CEO & President [37]

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Yes, so first of all, both -- all the territories -- just to reiterate, we've retained 100% of the economics in the U.S. In all of the territories offshore, excluding the Kirin territories and the AbbVie potential territories are burdened by double-digit royalties to us. In addition to that, AbbVie would have -- if they elected in, would have to reimburse us for 100% of our development cost to date and then would be cost sharing after that.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [38]

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Have you disclosed what that amount is approximately?

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J. Warren Huff, Reata Pharmaceuticals, Inc. - Chairman, CEO & President [39]

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No, we haven't.

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Operator [40]

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Ladies and gentlemen, this now concludes our Q&A portion of today's call. I would now like to turn the call back over to Vinny Jindal for any closing remarks.

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Vineet R. Jindal, Reata Pharmaceuticals, Inc. - VP of Strategy [41]

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Thanks, Dimitrios. Thanks, everyone, for joining us this morning. We're looking forward to updating you on our progress again soon. Take care.

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Operator [42]

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Ladies and gentlemen, thank you for attending today's conference. This does conclude the program. And you may all disconnect. Everyone, have a wonderful day.