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Reata Pharmaceuticals

might drop over 50% on an

imminent regulatory update
Reata shareholders have purchased a time bomb for their portfolio as
success is assumed, yet unlikely
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As of the date of this presentation, the Authors may have positions in
and may own option interests on the stock of the Company covered
herein (Reata Pharmaceuticals) and stand to realize gains in the
event that the stock price declines. Following the publication, the
Authors may transact in the securities of the Company. All
information contained in this report is believed to be accurate and
reliable and has been obtained from public sources. All expressions of
opinion are subject to change without notice, and the Authors are not
obligated to update this report or any information contained herein.
Research reports and presentations are not investment advice or
recommendations to buy or sell any security. All investors should
perform their own diligence and reach their own conclusions.
5-minute summary
Reata Pharmaceuticals:
The months ahead
Pre-NDA meeting with the NDA Approval, but
ADCOM skepticism
FDA Filing
“Exondys 53”

Regulatory Update Press Briefing docs reveal efficacy

release: concerns:
-> Can’t file based on current -> Likely negative AdCom vote
data -> Likely CRL
-> Stock down >50% -> Stock down >50%

Base Case Bull Case

Bardoxolone doesn’t work (and is unsafe)

• A pivotal P3 study of Bardoxolone was halted in 2012 for safety:

 Bardoxolone didn’t reduce progression to end stage renal disease
 Bardoxolone was associated with a statistically significant increase in heart failure
and a cardiovascular death signal
 But showed profound weight loss

• We believe Reata Pharmaceutical subsequently pivoted to rare diseases

(lower safety threshold) and aimed to produce false positive efficacy results
based on weight loss alone (such as a decline in serum creatinine in Alport
The reduction in serum creatinine is due to
weight loss and is clinically meaningless
Bardoxolone causes profound Weight loss causes a direct decline of
serum creatinine (and increase of eGFR
weight loss. by MDRD = Reata’s primary endpoint).

The interaction between muscle weight/body weight and serum creatinine is obvious and well understood. In
our eyes, the FDA is highly unlikely to approve bardoxolone on this serum creatinine data alone.
Weight loss leads to massive overestimation
of true kidney function, when using MDRD
and serum creatinine
Patients in a bariatric surgery study
lost 27kg in 6 months:
 Measured, absolute mGFR decreased by
-9ml/min/1.73m2 (p=0.021)
 MDRD eGFR (estimated based on serum
creatinine) increased by
13ml/min/1.73m2 (p<0.001)
 The weight loss of 27kg therefore caused
an overestimation of the true GFR by

• Patients in Reata’s prior studies lost

between 4 and 15kg of weight during
a 48-week treatment period,
depending on baseline BMI
 eGFR “retained benefit” increased by
5ml in the CARDINAL trial.
 You’d expect those patients to do even
better, just due to weight loss alone.
*MDRD stands for “Modification of Diet in Renal Disease” and is a method of
estimating GFR based on serum creatinine.
A 5-minute call with a physician can
save you 50% or more…

• A reduction in body weight and/or

muscle mass causes a decline in
serum creatinine.

• This is a basic physiology. Every

physician should be able to support
that statement.

• If you disagree with our report, we

challenge you to discuss this with a
physician (preferably

*We recognize this is a play on the famous Geico commercials. We don’t own rights to the gecko but we think even he could con firm a loss in
muscle mass will reduce serum creatinine/increase eGFR.
FDA guidance is not equal to a SPA, and the FDA
will not automatically approve bardoxolone
What bulls think: What we think:
FDA guidance: Sponsor can file for FDA guidance is unsurprising. Tolvaptan was
Accelerated Approval based on retained approved (in part) on the same endpoint. However,
benefit analysis at 52 weeks. it’s not a SPA.

Reata was able to show a decrease in Serum creatinine decrease was an artifact due to
serum creatinine at 52 weeks. profound weight loss. No evidence of real efficacy.

FDA will critically review the data package, including

FDA will automatically approve.
Cystatin C data and weight loss data.

Reata will be able to replicate this FDA will not approve bardoxolone based on retained
playbook in every other kidney disease. eGFR benefit in Alport (or any other kidney disease).

We are working on filing a citizen’s petition to provide the FDA with our analysis.
The EMA probably already told Reata that it can’t
file – and its partner dropped the program last year


Bulls have celebrated the fact that AbbVie dropped Reata for a total cash payment of only $330M ($75M of
which upfront), just weeks prior to the read out of 2 pivotal trials.

The drug developers at ABBV are not stupid and were in possession of all patient level data and regulatory
correspondence. They dropped this program for a reason. If this isn’t a giant red flag, we don’t know what is.
Detailed Report
Executive Summary (1/2)
Reata Pharmaceuticals is a clinical stage biopharmaceutical company focused on
developing small molecule therapies bardoxolone and omaveloxolone to treat rare forms of
1 chronic kidney disease (CKD) and a rare neurological disease called Friedreich’s ataxia
(FA), respectively.

Bardoxolone supposedly functions by activating the transcription factor Nrf2, though

2 there seems to be a lack of consensus in the scientific community on what exactly
activating Nrf2 does.

Reata Pharmaceuticals has rallied in recent months on the promise that it could file an
NDA for bardoxolone based on a “retained eGFR benefit” endpoint, which it was
3 subsequently able to demonstrate. However, this effect is due to the profound weight loss
that results from taking the drug, which in turn artificially decreases serum creatinine,
thereby increasing eGFR.

There are other ways to measure GFR, which will likely prove bardoxolone is ineffective.
4 Furthermore, the FDA will correlate the change in eGFR with change in body weight and
call Reata’s bluff.
Executive Summary (2/2)
Bardoxolone was previously shown to be ineffective in reducing the risk of end stage renal
5 disease, and it demonstrated significant safety concerns (primarily heart failure events).

Abbvie recently terminated its licensing agreements with Reata just weeks prior to the Phase 2
6 readouts.

A number of regulatory concerns are currently looming over Reata. The FDA guidance is
unsurprising, as Tolvaptan was already approved – partially -on the same endpoint in another
7 rare kidney disease. However, the guidance doesn’t mean the FDA will ignore the totality of the
clinical data. The FDA must reject the NDA if it doesn’t find substantial evidence of efficacy.
 The company’s disclosures indicate that the EMA likely already told Reata they can’t file based on the
current clinical data, as “additional discussions will be needed”.
 We expect the FDA to do the same after the company’s Pre-NDA meeting, in which a negative
“regulatory update” press release would likely send the stock down >50% and could happen any day.

We would retract our report if Reata were able to back its claims with additional data. We’ve
8 already debunked their standard defense.
1 Reata Pharmaceuticals Overview
• $6.8 billion current market
capitalization with $664
million cash on hand at the
end of 2019.
• Stock has tripled, reaching
a peak of ~$250 since
positive data
announcements on
bardoxolone and
omaveloxolone in October
• We estimate bardoxolone
accounts for approximately
75% of the company’s
current valuation.

1 Bardoxolone – Reata’s CKD Asset

• It has been shown across multiple clinical
trials that bardoxolone decreases serum
creatinine while patients are on the drug
• We believe, this acute bardoxolone effect is
either due to hyperfiltration or some effect on
tubular transporters/tubular function
• The increase in eGFR occurs rapidly and
most of this is lost after discontinuation of
the drug, which makes a disease-modifying
effect unlikely
• It has been established that the acute
bardoxolone effect (published in NEJM 2011)
is clinically meaningless (failed outcomes
study, NEJM 2013)
• Therefore, the FDA has asked Reata to
demonstrate a retained benefit

1 Bardoxolone – Reata’s CKD Asset

• Following discontinuation of bardoxolone,
serum creatinine increased – but didn’t go
all the way back to baseline

• Reata argues that this is definitive prove

of disease modifying activity or “retained

• Bulls believe that the FDA will accept the

company’s narrative and that there’s very
little risk around the regulatory approval

1 Bardoxolone – Reata’s CKD Asset

• However, bardoxolone was shown to cause
profound weight loss in multiple clinical
trials – so profound that it could be
approved as a weight loss drug (if only it
were safe).

• Weight loss and loss of muscle mass

decrease serum creatinine.

• The weight loss invalidates the company’s

claim that the decrease in serum
creatinine (increase in estimated GFR) is
strong evidence of a retained benefit on
true GFR.
2 Obscure Mechanism of Action as an
“Nrf2 Activator”
• Bardoxolone supposedly functions by
activating the transcription factor Nrf2
to “normalize mitochondrial function,
restore redox balance, and resolve

• However, the exact role of Nrf2 is still

widely unknown.

• The company presented preclinical data

on November 7, 2019 demonstrating
that the Nrf2 pathway increases GFR by
increasing the active glomerular
filtration area, yet there’s no conclusive
evidence of this in the literature.
3 What Reata was able to show in Alport
3 What Reata was able to show in Alport
Syndrome Key secondary endpoint for

regulatory purposes was retained
benefit at Week 52 (after
discontinuing the drug for 4 weeks)

• Discontinuation is important, as the

drug also has an acute effect on
eGFR/serum creatinine due to
changes in filtration.

• The retained benefit was

5.14ml/min relative to placebo (or
about 8.2% improvement of baseline

We believe that this 8.2% improvement

is either entirely or primarily due to
weight loss observed with bardoxolone
and is therefore unreliable as a
surrogate marker.
Glomerular Filtration Rate (GFR) is
a measure of Kidney Function
• The glomerular filtration
rate, or GFR, is a
measure of how well your
kidneys are cleaning
your blood - taking out
waste and extra water.
• Normal values range
from 60-120ml/min.
• It can be measured or
estimated by multiple
methods and through
multiple formulas.
The easiest way to estimate or measure
GFR is by looking at creatinine :
estimated GFR (eGFR)
The easiest way to estimate GFR is to:
• measure creatinine in serum
Creatinine • make assumptions around the amount
from Creatinine of creatinine flowing from muscle to
in Serum
Muscle the serum (by incorporating age,
weight, race, etc.)

• estimate GFR through formula
This is what we are GFR
trying to figure out

excreted in
3 Who has a higher serum Creatinine?

Serum creatinine is proportional to muscle mass. It is not

surprising that more heavily muscled people have more serum
creatinine. Whether their kidney function is adequate is another
matter entirely. To know this, we need to know how much of the
creatinine they produce is excreted in urine.

Measuring the serum creatinine of the gentleman on the left in the

absence of urine creatinine would make a clinician think about
renal disease. The woman above may have a low serum creatinine
but poor renal function. We should therefore measure creatinine in
the urine as well for a more accurate picture.
The easiest way to estimate or measure
GFR is by looking at creatinine:
measured GFR (mGFR)
A more accurate method is to measure
creatinine in serum and urine.
Creatinine This method allows an exact
from Creatinine calculation of the observed GFR,
Muscle Creatinine in Serum without making assumptions about
creatinine production.

This is what we are GFR
trying to figure out

excreted in
3 Reata only measured serum creatinine
and claims that its drug improves eGFR
What Reata has shown:
Serum creatinine decreased 4 weeks
after discontinuation of a 48-week course
of bardoxolone (= eGFR increased).
in Serum What Reata is trying to convince
Muscle Creatinine
investors and the FDA of:

This is definitive proof that chronic
bardoxolone treatments are improving

excreted in
3 What bardoxolone does and the
importance of the “retained benefit”
• The acute increase in eGFR has been
shown to be clinically meaningless as
an outcomes study failed in 2012.

• The FDA requires bardoxolone to

demonstrate a “retained benefit” as a
proxy for delayed disease progression.

• In the Phase 2 CARDINAL trial, the

retained eGFR benefit was +4.1
ml/min/1.73m2 (P<0.05) over baseline.
In the Phase 3 CARDINAL trial, the
retained eGFR benefit was -0.96
ml/min/1.73 m2, meaning eGFR had
actually fallen below the baseline.
3 However, Reata has also proven that
bardoxolone drastically decreases body
weight and may lead to muscle wasting
Reata’s data is not proof of a true
improvement of GFR, as the decrease
Creatinine in serum creatinine is likely caused
in Serum by less creatinine production
Muscle Creatinine
(through a decrease of body weight).

Nice Trick! GFR
Sorry, Reata!

excreted in
3 Bardoxolone causes profound weight loss
“Bardoxolone methyl has been associated with
significant decrease in weight, which could, in theory
contribute to observed increases in eGFR.”

In clinical studies, bardoxolone treatment led to 4-

15kg (9-33 lbs.) of weight loss over 48 weeks of
treatment, depending on baseline BMI.

Fun fact: Bardoxolone would be a competitive weight

loss drug, if developed in that indication. It’s a pity
its unsafe and weigh loss drugs don’t sell…

Effects of bardoxolone methyl on body weight, waist circumference and glycemic control in obese
patients with type 2 diabetes mellitus and stage 4 chronic kidney disease
3 Some formulas account for weight loss
in calculating eGFR; MDRD does not
• Creatinine is made in muscles. Serum
creatinine is highly dependent on
body weight.

• This is not rocket science but based on

common sense and well understood

• The well known Cockcroft-Gault

formula to estimate GFR (published
1973), therefore accounts for body
3 Some formulas account for weight loss in
calculating eGFR; MDRD does not
• Reata didn’t disclose how it calculated
eGFR in its pivotal Alport study

• But it has consistently used MDRD in

its other studies.

• MDRD does not account for weight.

If the cystatin C data supported Reata’s hypothesis, they surely would have shown it.
Weight loss causes a decrease in serum
creatinine, thereby increasing eGFR:
Evidence from interventional studies
Patients in a bariatric surgery
study lost 27kg in 6 months:
 Measured, absolute mGFR
decreased by -9ml/min/1.73m2
 MDRD eGFR (estimated based
on serum creatinine) increased
by 13ml/min/1.73m2 (p<0.001)
 The weight loss of 27kg
therefore caused an
overestimation of the true GFR
by 22ml/min/1.73m2
 Importantly, cystatin C
clearance was unaffected by
weight loss (-2ml/min/1.73m2,
 The FDA will likely be able to
use Reata’s cystatin C data to
call their bluff.
Weight loss causes a decrease in serum
creatinine, thereby increasing eGFR:
Evidence from interventional studies

At 24 months, eGFR increased by 7.1% for patients

with chronic kidney disease stage III, despite an
overall weight loss of only 4kg.
Weight loss decreases serum creatinine,
thereby artificially increasing eGFR:
Nephrologists are aware of this

“Hence, the said bardoxolone associated weight loss may

have led to muscle wasting with a subsequent decline in the
serum creatinine level, leading to misleadingly calculated
rise in eGFR,3, 9 not to mention that muscle loss per se may be
associated with poor outcomes in both CKD and the general
population. 12, 13”
4 There are other ways to measure GFR and
to prove that bardoxolone is ineffective
• The Gold Standard for measuring eGFR is inulin clearance. Inulin is given by infusion and its
excretion is then measured in urine.

• If we wanted to prove in a clinical study that our drug works, we would have chosen such an
endpoint. At the very minimum, we would have used a 24hr urine collection to actually
measure creatinine clearance.

• We suspect that there’s a very good reason why Reata didn’t do this.

• However, the FDA can demand an analysis of cystatin C clearance, which can be done based
on the blood chemistry samples that Reata already collected.
4 There are other ways to measure GFR and prove that
bardoxolone is ineffective: Cystatin C clearance will
prove that bardoxolone is ineffective
We know, that cystatin C clearance is:

• Uncorrelated to body weight

• Not affected by even large weight loss

(through bariatric surgery)


There are other ways to measure GFR and to prove that
4 bardoxolone is ineffective:
The FDA has looked at cystatin C clearance, when it
reviewed Tolvaptan

Reata won’t be able to reproduce this consistency.

There are other ways to measure GFR and to prove that
4 bardoxolone is ineffective:
Further, the FDA will correlate change in eGFR with change in
body weight

Weight was unchanged compared to placebo

for the Tolvaptan trial.

The large decrease in weight observed with

bardoxolone will cause the FDA to conduct
additional sensitivity analyses and correlate
the change in body weight with the primary

If the change in serum creatinine (=eGFR

improvement) is highly correlated with change
in body weight, the FDA will have to reject
Reata’s NDA.
5 Bardoxolone was previously shown to
be ineffective and unsafe
• The BEACON study of bardoxolone done
by Reata was terminated due to an
increase of episodes of heart failure,
hospitalizations, and deaths.

• The study also failed to show a benefit in

reducing the risk of of end stage renal
disease (ESRD).

• Other adverse events associated with

bardoxolone included worsening
proteinuria, massive weight loss, muscle
spasm, hypomagnesemia, liver function
disarrays, and GI effects.
The Extinguished Beacon of Bardoxolone: Not a Monday Morning Quarterback Story

Bardoxolone Methyl in Type 2 Diabetes and Stage 4 Chronic Kidney Disease

Bardoxolone was previously shown to be
5 ineffective and unsafe: Ineffective on
progression to end stage renal disease

Bardoxolone Methyl in Type 2 Diabetes and Stage 4 Chronic Kidney Disease

5 Bardoxolone was previously shown to be
ineffective and unsafe: Statistically
significant increase in heart failure

Bardoxolone Methyl in Type 2 Diabetes and Stage 4 Chronic Kidney Disease

Bardoxolone was previously shown to be
5 ineffective and unsafe:
Cardiovascular death signal

Bardoxolone Methyl in Type 2 Diabetes and Stage 4 Chronic Kidney Disease

6 Abbvie recently terminated licensing
and collaboration agreements
• In 2010, Abbvie (then part of Abbott) paid $450 million for the rights to develop bardoxolone
outside the US, followed by another $400 million deal from Abbott the following year to jointly
develop and commercialize the remainder of Reata’s drugs.
• The collaborations went sour in 2012 when a Phase 3 trial of bardoxolone was terminated by
the DSMB when it was found that patients treated with bardoxolone experienced significantly
higher rates of heart-related adverse events (heart failure, hospitalizations, and deaths).
• After other development efforts over the last few years, Abbvie still decided to terminate its
agreement with Reata pertaining to bardoxolone in October 2019 and will receive a total of
$330 million in cash, paid in installments through the end of 2021.
• Why would Abbvie, who desperately needs top line growth, not flip over the card and then sell
the rights back to Reata if they really wanted to? It would have cost them nothing to do so.
Therefore, the only way this decision makes logical sense is if Abbvie thought bardoxolone
wouldn’t be able to secure approval.
• Investors appear to be holding on to Reata for a buyout potential and this is just one other
example of why that’s not likely to happen.
7 Regulatory Woes
• Reata’s disclosures indicate that the European Medicines Agency (EMA)
already told the company that they can’t file file a marketing application
based on the existing clinical data:

• Additionally, on the FY 2019 earnings call, Reata refused multiple times to

comment on or provide any guidance regarding ongoing interactions with
any regulatory agencies.

The FDA’s guidance does not mean they won’t pivot and take into consideration the
totality of the clinical data, which we have presented here. We expect the same
response from the FDA after the Pre-NDA meeting if they don’t find substantial
evidence of efficacy.
7 Regulatory Woes
• Due to the reasons outlined in this presentation, we expect the same outcome with the
FDA after the company’s Pre-NDA meeting.

• Despite the FDA having provided guidance that a retained eGFR benefit over placebo
may be enough to support approval,

• We see the possibility of two outcomes:

 The FDA rejects the NDA, requesting more data and additional analyses to support the filing.
 The FDA could accept the NDA, but require an advisory committee (AdCom) to convene prior to
voting on approval due to questions raised from previous safety concerns and current efficacy
assessments. The AdCom would likely see insufficient evidence for approval based on the current
data package, which would ultimately result in a negative ruling from the AdCom and by
extension, the FDA.

• A negative AdCom could still result in approval, though the enthusiasm would wane due
to the insufficient support of safety and efficacy in Alport Syndrome and CKD.
7 Tolvaptan Approval
• Tolvaptan approval was based off the REPRISE trial, which was designed
and conducted under a Special Protocol Assessment (SPA).

• Though not an absolute guarantee, a SPA agreement indicates that the FDA
has thoroughly reviewed and established that a clinical trial is adequately
designed to support subsequent acceptance of an NDA.

• The primary endpoint that Tolvaptan approval was based on was eGFR, and
Reata is assuming this will suffice for bardoxolone approval, based on their
discussions with the FDA.
 However, FDA guidance doesn’t carry the same weight as a SPA and is more
susceptible to requests for modifications from the FDA.
Further, Tolvaptan’s approval was supported by a second
7 study that showed a statistically significant improvement of
8 Data analysis we would like to see
• We are happy to publicly change our opinion if Reata releases the following data to prove true
the true efficacy of bardoxolone.

• We believe that those are all analyses that the FDA will require anyway:
 Cystatin C values and CKD-EPI-cysC at baseline and at 52 weeks for bardoxolone and placebo arms in

 Weight change and, if available, change in body composition by arm in CARDINAL

 Patient level data/ regression of change in eGFR by MDRD and change in body weight from week 0 to
52, for each arm in CARDINAL

 Change in mGFR in CARDINAL from Week 0 to 52. If not available, please explain why urine creatinine
was not measured in a potentially pivotal CKD trial.

• Reata has the data. Why haven’t we seen it? AbbVie has seen it and they chose to walk away.
What is Reata hiding? The company could publish the FDA meeting minutes. Nothing stops
them from doing so.
8 Reata’s defense: Bardoxolone has been shown to increase measured
GFR (inulin clearance method) in a Japanese study

• We are aware that mGFR increased by 6.6ml/min/1.73m 2 at 16 weeks in the TSUBAKI study
(ASN 2017).

• However, this is the effect of acute bardoxolone treatment. We don’t dispute that bardoxolone
increases GFR in an acute manner.

• We believe that this acute effect is caused by hyperfiltration and potentially harmful.

• The FDA doesn’t consider it to be clinically meaningful either – that’s why RETAINED benefit
after discontinuation for 4 weeks needs to be shown.

• We believe that in Reata’s case, the claimed benefit is primarily a function of weight loss.
8 Reata’s defense: Bardoxolone does not cause a reduction in muscle
mass/ creatinine production/ creatinine excretion

• Reata will likely claim that no statistically significant reduction

in 24-hour urinary creatinine excretion has been shown in

• BEACON enrolled 2185 patients and had a median follow up of

9 months, before it was halted for safety.

• However, Reata only showed urine creatinine data for 5.7% of

the enrolled patients and only for baseline and 4 weeks. It also
needs to be emphasized that the patients were still on drug.

• The data shows that creatinine excretion declined by 4.8% in the

bardoxolone arm and only 0.3% in the placebo arm.

• The results were not statistically significant, which means this

was purely a function of sample size and standard deviation.

• The data actually support our hypothesis. Why does a drug

that’s supposed to increase kidney function and filtration of
creatinine actually decrease excreted creatinine by 4.8%?

• In steady state, creatinine excretion should be equal to 4.8% decline!

creatinine production.

• The weight loss at Week 4 is relatively modest, when compared

with Week 48. We would expect urinary creatinine to be
considerably lower at Week 48.

• Did Reata measure it? If it did, we would love to see it.