2023-06-20 18:49:40 ET
Summary
- A Prior Approval Supplement for Reata Pharmaceuticals, Inc.'s SKYCLARYS for Friedreich's Ataxia has been submitted with a Priority Review Date of Mid-August 2023.
- It is expected that the global Friedreich's Ataxia market could reach $2.06 billion by 2030.
- A phase 2 study using Cemdomespib for the treatment of patients with diabetic peripheral neuropathy is expected to start in Q3 of 2023.
- The global diabetic neuropathy market size is projected to reach $8.74 billion by 2030.
Reata Pharmaceuticals, Inc. ( RETA ) is a good speculative biotech play to look into. The reason why I state that is because it has already received FDA approval of a drug known as SKYCLARYS, which has been approved for the treatment of patients with Friedreich's Ataxia [FA]. While having some issues in manufacturing with respect to the launch of the drug, I believe that further value can be unlocked with respect to another target indication in the pipeline.
I'm talking about the advancement of another drug in the pipeline known as Cemdomespib, which is being developed for the treatment of patients with diabetic peripheral neuropathy [DPNP]. While this is still in early-stage clinical testing, I believe that if this candidate is ultimately successful, it would provide far more value for the company than that of SKYCLARYS.
Don't get me wrong, the target market for FA is large, but the market opportunity for targeting diabetic peripheral neuropathy is even bigger. With FDA approval of SKYCLARYS for the treatment of patients with FA already established, plus the ability to target another large market indication with a drug known as Cemdomespib, these are the reasons why I believe that Reata Pharmaceuticals is a good speculative biotech play to look into.
FDA Approval Of SKYCLARYS For Friedreich's Ataxia Is The First To Bring Value
As I noted in the beginning above, Reata Pharmaceuticals is already doing well as a pharmaceutical company since it has already received regulatory approval for a drug in its pipeline. Of course, I'm talking about the fact that it has already received FDA approval of SKYCLARYS for the treatment of patients with Friedreich's Ataxia. Friedreich's Ataxia [FA] is an inherited disorder whereby the body's nerves are greatly affected. One thing to note about this disorder is that in order for a person to obtain it they have to inherit a defective gene from both parents.
This is a pretty good market opportunity for Reata, especially when you consider that SKYCLARYS is the first drug ever to be approved for the treatment of patients with FA. Not only does this finally give patients a treatment option for this disease, but the fact that no other drug has been approved specifically to target this, means Reata has the entire market to itself. It is expected that the global Friedreich's Ataxia market could reach $2.06 billion by 2030 . There are several symptoms that these patients might experience as well, such as the following:
- Difficulty walking.
- Fatigue.
- Slower than normal speech.
- Changes in feeling sensation.
The FDA approved SKYCLARYS for the treatment of patients with Friedreich's Ataxia back on February 28, 2023. Even though this drug has been approved, there is a possible catalyst opportunity for investors to look forward to. There is an ongoing review of a Prior Approval Supplement [PAS] to update the drug substance specification for SKYCLARYS. The FDA had accepted and is reviewing this submitted application . A Priority Review target action date for this PAS has been set for mid-August of 2023. The key question would be, why was this PAS for SKYCLARYS even necessary? It is because any major change to a regulatory application of a drug prior to distribution requires it to be done. If anything, this PAS is only going to help Reata increase sales of this drug once it hits the market. Should the PAS review go well, then it believes that SKYCLARYS will be available for patients through the specialty pharmacy no later than mid-August 2023.
There is also an opportunity to market SKYCLARYS [omaveloxolone] in another territory besides the U.S. market as well. That's because Reata is also seeking to receive European marketing approval of this drug for the treatment of patients with FA. This might take a bit longer, and that's because even though a Marketing Authorization Application [MAA] of omaveloxolone was submitted to the European Medicines Agency [EMA], the company received Day 120 list of questions and requests that it must address before it can eventually receive regulatory approval of this drug for this territory.
The downside is that Reata doesn't expect to provide responses of these questions to the EMA until Q3 of 2023. Still, if all goes well on this regulatory application front, then the company will be able to market omaveloxolone in the European territories as well. This would further enhance the amount of sales possible that it could generate with this specific drug.
Cemdomespib Has Far Greater Market Potential Beyond SKYCLARYS In FA
As I stated above, the market opportunity for SKYCLARYS targeting the Friedreich's Ataxia market is huge at $2.06 billion by 2030. However, Reata has another drug in the pipeline targeting an even bigger market opportunity. It is advancing a drug in its pipeline known as Cemdomespib for the treatment of patients with diabetic peripheral neuropathy [DPNP].
Before diving into DPNP, it is important to understand what diabetes is. Diabetes occurs when your body has trouble producing energy from food. That is, there is a lack of insulin in the body or the body doesn't let insulin perform its function as well as it should be able to. Insulin is important because it is the main substance that lets blood sugar into your body's cells for use as energy. Otherwise, when this doesn't occur, it causes sugar to remain in the bloodstream, causing a host of issues for the patient. How does diabetes cause diabetic peripheral neuropathy?
Well, remember above that I stated that the patients circulation of high blood sugar [glucose] in the body causes major issues. Such circulating high blood sugar can target and injure the nerves. This leads to pain and other symptoms found in patients with diabetic peripheral neuropathy. Diabetic Peripheral Neuropathy is most common type of diabetic neuropathy and often affects the legs and feet, but can also affect the arms and hands as well. What about this disorder makes it a good market opportunity for Reata to go after? The global diabetic neuropathy market size is projected to reach $8.74 billion by 2030 . It is said that about 40% to 50% of patients with diabetes experience diabetic peripheral neuropathy. Not only that, but half of this specific patient population experience nerve pain.
How can Reata Pharmaceuticals benefit in advancing cemdomespib against this target market indication? It can because of the lack of adequate approved therapies. About 50% of patients who take currently approved drugs do not benefit from them. In essence, when taking such treatments they are not able to alleviate their pain. In addition, some approved therapies are not safe/tolerable at all. Thus, the patient has to completely give up taking their medication. A downside is that it might be a bit of a wait to see if Cemdomespib can be used to treat this patient population. That's because Reata doesn't expect to initiate a phase 2 study using this drug to treat DPNP until Q3 of 2023.
Still, I believe that traders/investors should be excited about the advancement of this drug. The reason why is because successful clinical testing, along with eventual marketing of Cemdomespib for the treatment of patients with DPNP, means a much larger market opportunity being targeted compared to FA.
Financials
According to the 10-Q SEC Filing , Reata Pharmaceuticals had cash, cash equivalents and marketable securities of $321 million as of March 31, 2023. This company is now well capitalized for two big reasons. The first reason is that Reata Pharmaceuticals and its strategic collaborator Kyowa Kirin Co. decided to discontinue advancement of a late-stage asset known as bardoxolone for the treatment of patients with diabetic kidney disease. The problem ultimately was that there was no difference in end-stage-renal disease [ESRD] events between bardoxolone and placebo after 3-years of treatment. While the discontinuation of this late-stage program is not ideal, it does at least provide cash saving measures. That's because there will no longer be a need to further fund this clinical program now that it has been discontinued.
A second reason why the company should be well capitalized for an extended period of time is because of a debt facility that was just done. Such a debt facility was established between Reata and Pharmakon Advisors, LP for an aggregate principal amount of up to $275 million in 4 tranches. Such tranches that have been given or will be given are as follows:
- $75 million given on May 12, 2023.
- $50 million to be funded after certain regulatory or production requirements are met.
- Final two tranches of $75 million to each be funded based on achieving certain sales based milestones.
Having said all that, Reata believes that it has enough cash to fund its operations through the end of 2026. A final reason on why it should be able to have stability with its cash function is because of the potential sales it could earn by commercializing SKYCLARYS for the treatment of patients with FA.
Risks To Business
There are several risks that traders/investors should be aware of before investing in Reata Pharmaceuticals. The biggest risk of all to consider would be relating to the submission of the PAS I noted above, dealing with SKYCLARYS. The FDA is currently reviewing the PAS for this drug, and if all goes well, then the company would expect SKYCLARYS to be available to the specialty pharma no later than mid-August 2023. There is no guarantee that the FDA will approve the PAS, which has been submitted and in that case that means commercialization of SKYCLARYS for the treatment of patients with FA could be further delayed.
A second risk to consider would be with respect to the ongoing European review of omaveloxolone [SKYCLARYS] for the treatment of patients with FA. The company doesn't expect to submit the questions and requests to the EMA for this application until Q3 of 2023. There is no assurance that what is submitted to this regulatory agency will be sufficient to warrant regulatory approval of omaveloxolone for this territory.
A final risk to consider would be with respect to the advancement of Cemdomespib for the treatment of patients with DPNP. A phase 2 study, using this drug to treat this patient population, is not expected to start until Q3 of 2023. There is no guarantee that once the final results are released from this phase 2 study, that they will be positive.
Conclusion
The final conclusion is that Reata Pharmaceuticals is a good speculative biotech play to look into. That's because it had already received FDA approval of SKYCLARYS for the treatment of patients with Friedreich's Ataxia [FA]. It even has potential to receive regulatory approval of this drug for this patient population in the European Union as well. This would further expand the possible sales that could be made with this drug.
While I think that SKYCLARYS should perform well once commercialized, especially if the PSA review by the FDA goes well, there is an even better indication in the pipeline to consider. One, as I noted above, would provide a far larger market opportunity for Reata. I'm talking about the advancement of Cemdomespib, which is being developed for the treatment of patients with diabetic peripheral neuropathy [DPNP].
As I stated above, the global diabetic neuropathy market size is projected to reach $8.74 billion by 2030. With FDA approval of SKYCLARYS for the treatment of patients with FA already established, plus the ability to target another large market indication with a drug known as Cemdomespib, these are the reasons why I believe that Reata Pharmaceuticals is a good speculative biotech play to look into.
For further details see:
Reata: FDA Approval Of SKYCLARYS Isn't Only Driver Moving Forward