Delayed-Start Analysis (Non-Inferiority Test)1
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Placebo-Controlled Week 48 (Δ1) |
Delayed-Start Week Ex. 72 (Δ2) |
Delayed-Start Week Ex. 96 (Δ2) |
Delayed-Start Week Ex. 120 (Δ2) |
Delayed-Start Week Ex. 144 (Δ2) |
Difference (LS Mean ± SE) |
-2.17 ± 1.089 p=0.0471 |
-2.91 ± 1.437 p=0.0433 |
-2.19 ± 1.375 p=0.1128 |
-2.74 ± 1.264 p=0.037 |
-2.58 ± 1.468 p=0.0796 |
Estimate = Δ2– 0.5 × Δ1 |
- |
-1.826 ± 1.3535 |
-1.10 ± 1.2991 |
-1.657 ± 1.2086 |
-1.496 ± 1.4630 |
Upper Limit of 1-sided 90% CI for Estimate |
- |
-0.090* |
0.567 |
-0.106* |
0.382 |
1Non-Inferiority test performed using a MMRM analysis with a Toeplitz covariance structure. *Threshold for non-inferiority was met. |
The graphical representation of changes from baseline in mFARS for omaveloxolone and placebo groups shows the separation at the end of the placebo-controlled period is maintained in the open-label period at Extension Week 72 through Extension Week 144.
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Change from Baseline in mFARS (Patients without Severe Pes Cavus)
A longitudinal analysis was also performed on the updated data to calculate annualized slopes incorporating all available data from the MOXIe Extension through Week 144. The results showed no significant difference in slope between the placebo-to-omaveloxolone group and the omaveloxolone-to-omaveloxolone group (p=0.66).
MOXIe Extension Annualized mFARS Slope Through Extension Week 144 (± SE)
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mFARS Change per Year |
Omaveloxolone-to-Omaveloxolone (n=34) |
0.446 ± 0.6340 |
Placebo-to-Omaveloxolone (n=39) |
0.760 ± 0.2773 |
Difference |
-0.314 ± 0.7118 p=0.6602 |
The resulting parallel trajectories between both treatment groups are consistent with the hypothesis that earlier omaveloxolone treatment altered the disease course. Patients who received omaveloxolone during the double-blind MOXIe Part 2 had a benefit that could not be recovered by patients initially randomized to placebo who began omaveloxolone one year later in MOXIe Extension.
Post Hoc Propensity-Matched Analysis of MOXIe Extension (Submitted to FDA in the Third Quarter of 2022)
The intent of the Post-Hoc Propensity-Matched Analysis of MOXIe Extension is to facilitate interpretation of the open-label MOXIe Extension study using an external control, thus providing confidence in the durability of the treatment response. Accruing data in MOXIe Extension provides longer term follow-up for disease progression in patients receiving omaveloxolone; however, there is no long-term placebo arm for comparison.
MOXIe Extension data were compared to natural history external controls using propensity matching to provide longer term efficacy data in support of the statistically significant benefit demonstrated by pivotal MOXIe Part 2. Conceptually, the analysis compares the mFARS progression of omaveloxolone-treated patients in the open-label MOXIe Extension trial to the observed progression of propensity score-matched untreated patients in an external control group. Propensity matching is a statistical methodology utilized to identify and match patients in the MOXIe Extension study with patients in the external control group who are expected to have a similar disease progression based on the prognostic factors used to calculate the propensity scores.
The largest natural history study of Friedreich’s ataxia, FA-COMS, is a global, multi-center, longitudinal, prospective observational study that has enrolled more than 1,250 patients, with follow-up as long as 19 years in some patients. Clinical outcome measures, including mFARS, are assessed annually. The mFARS is a clinician-observed/performance-based outcome, all FA-COMS sites are tertiary care centers specializing in Friedreich’s ataxia, and all mFARS assessments are conducted in a standardized manner by trained neurologists with experience in Friedreich’s ataxia and other ataxias. The score for each component of mFARS is based on measurements of a patient’s functional ability using the same standardized set of instructions in both studies. Therefore, the significant
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overlap in sites, which provides a similar testing environment to patients across studies, and the use of the same standardized instructions for the FARS assessment make the methodology for mFARS assessments across the 2 studies highly comparable. The FA-COMS database constitutes a well-established, reliable, and well documented source of natural history data for Friedreich’s ataxia.
Patients from FA-COMS were matched to MOXIe Extension patients using propensity scores based on multiple covariates: sex, baseline age, age of Friedreich’s ataxia onset, baseline mFARS score, and baseline gait score. Selection of these covariates was based on clinical relevance (i.e., factors considered prognostic for Friedreich’s ataxia progression) and availability in both studies. The change from baseline in mFARS at Year 3 for MOXIe Extension patients compared to the propensity score-matched FA-COMS patients was analyzed as the primary efficacy endpoint using mixed model repeated measures (MMRM) analysis. Change from baseline in mFARS at Year 1 and Year 2 were secondary endpoints. Data from MOXIe Part 1 and MOXIe Part 2 were not included in this propensity-matched analysis. Only data from MOXIe Extension were compared to natural history data. The matching was carried out as optimal 1:1 matching without replacement which resulted in equal sized groups for analysis.
For inclusion in each of the study populations patients must have had (1) baseline mFARS, (2) at least one post-baseline mFARS within 3 years after baseline, and (3) values for all propensity score model covariates (i.e., sex, baseline mFARS score, age at baseline, age of Friedreich’s ataxia onset, and baseline gait score). The MOXIe Extension study population included 136 patients. Of these, 95 patients were essentially treatment naïve at the time of entry into MOXIe Extension (i.e., includes those patients who received placebo in MOXIe Part 2 or had participated in MOXIe Part 1 and been off treatment for a long time), and the other 41 patients were continuing treatment (i.e., includes those patients who received omaveloxolone in MOXIe Part 2). The primary natural history (i.e., FA-COMS) study population included 598 patients eligible for matching with the MOXIe Extension population. There are three primary analysis populations, each based on a propensity score match with the FA-COMS study population: (1) Primary Pooled (n=272; 136 in each group), (2) Placebo-to-Omaveloxolone (n=190; 95 in each group), and (3) Omaveloxolone-to-Omaveloxolone (n=82; 41 in each group). Demographics and baseline characteristics were highly comparable between MOXIe Extension patients and the matched FA-COMS external control groups.
Propensity-Matched Analysis: Demographics and Baseline Characteristics Used for Propensity Score Calculation (Primary Pooled Population)
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Characteristic |
Statistic |
Matched FA-COMS (n=136) |
MOXIe Extension (n=136) |
Age (years) |
Mean (SD) |
26.2 (13.72) |
26.6 (7.26) |
Age at Friedreich’s ataxia Onset |
Mean (SD) |
15.2 (10.48) |
15.5 (5.30) |
Sex, Female |
N (%) |
70 (51.5%) |
70 (51.5%) |
mFARS |
Mean (SD) |
41.0 (16.10) |
42.2 (12.60) |
Gait |
Mean (SD) |
2.7 (1.69) |
2.8 (1.36) |
In the Primary Pooled Population (n=272; 136 patients in each treatment group), by Year 3, patients in the FA-COMS matched set progressed 6.61 mFARS points whereas patients treated with omaveloxolone in MOXIe Extension progressed 3.00 points for a difference of -3.61 mFARS points (nominal p=0.0001). In this analysis, progression in mFARS was 55% slower in MOXIe Extension patients treated with omaveloxolone compared to matched untreated patients in the FA-COMS study.
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Propensity-Matched Analysis: LS Mean Change from Baseline in mFARS Scores (Primary Pooled Population)
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|
Baseline |
Year 1 |
Year 2 |
Year 3 |
|
N |
Mean (SD) |
N |
LS Mean (SE) |
N |
LS Mean (SE) |
N |
LS Mean (SE) |
MOXIe Extension |
136 |
42.22 (12.60) |
133 |
0.015 (0.56) |
102 |
1.18 (0.59) |
77 |
3.00 (0.66) |
Matched FA-COMS |
136 |
41.03 (16.10) |
108 |
2.11 (0.59) |
103 |
4.58 (0.59) |
83 |
6.61 (0.65) |
Difference |
- |
- |
- |
-2.10 (0.81) p=0.0101 |
- |
-3.41 (0.84) p< 0.0001 |
- |
-3.61 (0.93) p=0.0001 |
In the pivotal MOXIe Part 2, omaveloxolone-treated patients had experienced a reduction (i.e., an improvement) in mFARS score relative to the placebo group. The MOXIe Extension patients from the Primary Placebo-to-Omaveloxolone Population were essentially treatment-naïve at the time of entry into MOXIe Extension. After initiation of omaveloxolone treatment, at Year 1 this group experienced an improvement of neurologic function (as assessed by mFARS) relative to baseline. At Year 1, the treatment difference (-2.75 mFARS points; nominal p=0.0035) was similar in magnitude to the pivotal MOXIe Part 2 treatment difference in the primary analysis population (i.e., the Full Analysis Set) at Week 48 (-2.40 mFARS points).
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Propensity-Matched Analysis: LS Mean Change in mFARS Scores (Primary Placebo-to-Omaveloxolone Population)
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|
Baseline |
Year 1 |
Year 2 |
Year 3 |
|
N |
Mean (SD) |
N |
LS Mean (SE) |
N |
LS Mean (SE) |
N |
LS Mean (SE) |
MOXIe Extension |
95 |
42.81 (12.79) |
95 |
-0.43 (0.63) |
69 |
1.18 (0.69) |
56 |
3.21 (0.76) |
Match FA-COMS |
95 |
44.54 (18.04) |
72 |
2.32 (0.69) |
71 |
4.23 (0.68) |
64 |
7.29 (0.72) |
Difference |
- |
- |
- |
-2.75 (0.94) p=0.0035 |
- |
-3.06 (0.97) p=0.0017 |
- |
-4.09 (1.05) p=0.0001 |
In the Primary Omaveloxolone-to-Omaveloxolone Population, the treatment effect favored omaveloxolone treated patients relative to FA-COMS external controls at Year 1 and Year 2. A smaller difference between treatment groups was observed at Year 1 in the Omaveloxolone-to-Omaveloxolone Population than in the Placebo-to-Omaveloxolone Population. The MOXIe Extension patients in the Omaveloxolone-to-Omaveloxolone Population did not experience an improvement from baseline likely because they were in their second year of treatment with active drug. Of note, this group did experience persistence of benefit relative to the matched FA-COMS external control. The Omaveloxolone-to-Omaveloxolone Population represents the patients treated for the longest total duration, having previously received omaveloxolone in MOXIe Part 2. The treatment effect favored MOXIe Extension at each visit and consistently increased over time in this population in comparison to the FA-COMS external control group.
Propensity-Matched Analysis: LS Mean Change in mFARS Scores (Primary Omaveloxolone-to-Omaveloxolone Population)
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|
|
|
|
|
|
|
|
|
|
Baseline |
Year 1 |
Year 2 |
Year 3 |
|
N |
Mean (SD) |
N |
LS Mean (SE) |
N |
LS Mean (SE) |
N |
LS Mean (SE) |
MOXIe Extension |
41 |
40.85 (12.19) |
38 |
1.05 (1.09) |
33 |
1.10 (1.13) |
21 |
2.38 (1.33) |
Match FA-COMS |
41 |
39.64 (16.80) |
34 |
2.48 (1.12) |
33 |
3.57 (1.13) |
25 |
6.14 (1.24) |
Difference |
- |
- |
- |
-1.43 (1.56) p=0.3641 |
- |
-2.47 (1.60) p=0.1265 |
- |
-3.76 (1.82) p=0.0400 |
The FA-COMS study constitutes a well-established, reliable, and well documented source of natural history data for Friedreich’s ataxia. We acknowledge the limitations of a post-hoc, cross-study comparison. However, in the situation of a rare disease such as Friedreich’s ataxia, we propose these data comparing the long-term efficacy outcomes for omaveloxolone to propensity-matched natural history data provide confirmatory evidence of effectiveness for omaveloxolone for the treatment of Friedreich’s ataxia.
Mechanistic Validation of Nrf2 Target Biomarkers in Friedreich’s Ataxia (Submitted to FDA in the Third Quarter of 2022)
During the mid-cycle communication meeting discussion, the division requested to see the pharmacodynamic data contextualized with a discussion of the supporting independent literature regarding proposed biomarkers for label purposes. We have responded to the FDA’s request and, as briefly summarized below, we provided additional information including an integrated and detailed presentation of the disease pathophysiology of Friedreich’s ataxia, a review of the available pharmacodynamic data, justification of the relevance of these data in Friedreich’s ataxia, and an explanation of the relationship between the mechanistic data and the observed biomarker and clinical treatment effects in patients treated with omaveloxolone. As stated in the meeting, we believe these data do not just address their discussion topics regarding labeling but could also provide confirmatory evidence.
Friedreich’s ataxia is caused by genetic mutations in the frataxin (FXN) gene that result in insufficient amounts of FXN. At the cellular level, FXN deficiency is associated with impaired mitochondrial function, redox imbalance, and iron dysregulation. Additionally, lower mitochondrial function correlates with impaired neurologic function as measured by mFARS score in patients with Friedreich’s ataxia. Substantial evidence demonstrates that Nrf2 levels and activity are suppressed in cells from patients with Friedreich’s ataxia and in preclinical animal models of the disease. Although the molecular mechanism by which frataxin deficiency suppresses Nrf2 has not been fully characterized, dysregulated Nrf2 signaling is a common early upstream event that contributes to impaired mitochondrial energy production and redox imbalance in patients with Friedreich’s ataxia.
Nrf2 is a transcription factor that binds to specific DNA sequences called antioxidant response elements (AREs) that are located in the promoter regions of Nrf2 target genes. Binding to AREs allows Nrf2 to increase the transcription of its target genes, which play key roles in cellular metabolism and bioenergetic processes. Nrf2 target genes include γ-glutamyl transferase (GGT1), which plays a key role in redox balance, and ferritin heavy chain 1 (FTH1) and ferritin light chain (FTL), which combine to form ferritin, a protein involved in iron handling. By coordinating the expression of several enzymes and the production of key cofactors, Nrf2 activation restores redox balance, regenerates reducing equivalents, and modulates iron handling. Together, these effects increase the production of cellular energy (i.e., ATP) within the mitochondria in Friedreich’s ataxia patient fibroblasts and Friedreich’s ataxia disease models.
Treatment with omaveloxolone in MOXIe Part 1 resulted in dose-dependent increases in Nrf2 activity, as assessed by serum ferritin and GGT levels. Data from MOXIe Part 2 showed an association between omaveloxolone-induced Nrf2 activity and measures of neurological function, with larger increases in Nrf2 target levels associated with larger improvements in mFARS scores. Taken together, these data indicate that omaveloxolone rescues Nrf2 activity that is suppressed in patients with Friedreich’s ataxia and that the increase in Nrf2 activity is associated with a therapeutic benefit in these patients.
Regulatory Interactions in Europe
We have received a positive opinion from the Pediatric Committee on our Pediatric Investigation Plan with a commitment to seek scientific advice for additional input on the protocol design, and we also received EMA Follow-Up Protocol Assistance feedback regarding our nonclinical and CMC programs. The EMA feedback indicated that there were no identified impediments to our planned MAA submission and included agreement that certain nonclinical
30
studies, including 2-year carcinogenicity study data, may be submitted after approval. We recently complete the Pre-Submission meeting and plan to submit an MAA to the EMA for omaveloxolone this year.
Omaveloxolone in Other Neurological Indications
Omaveloxolone is a promising platform molecule. Because mitochondrial dysfunction is a key feature of many neurological and neuromuscular diseases, we believe omaveloxolone may be broadly applicable to treat such diseases by activating Nrf2 to normalize and improve mitochondrial function and ATP production.
Based on our understanding of the pathophysiology of neurological diseases characterized by mitochondrial dysfunction, inflammation, and oxidative stress, we believe omaveloxolone may be applicable to diseases such as progressive supranuclear palsy, Parkinson’s disease, frontotemporal dementia, Huntington’s disease, amyotrophic lateral sclerosis (ALS), Alzheimer’s disease, and epilepsy. Consistent with this, we have observed promising activity of omaveloxolone and our other Nrf2 activators in preclinical models of many of these diseases.
Our Nrf2 activators reduced seizure frequency in refractory, progressive epilepsy models and restored mitochondrial function in patient biopsy samples and preclinical models of Friedreich’s ataxia, ALS, familial and sporadic Parkinson’s disease, and frontotemporal dementia. In clinical trials, improvements in neuromuscular function have been observed in patients with Friedreich’s ataxia treated with omaveloxolone as assessed by mFARS, and improvements in mitochondrial function, as measured by reductions in blood lactate and heart rate, have been observed in patients with primary mitochondrial disease. Accordingly, we believe that omaveloxolone has the potential to treat a number of neurological and neuromuscular diseases that currently have few or no effective therapies, and we plan to pursue the development of omaveloxolone and our other Nrf2 activators for one or more of these diseases.
RTA 901 in Neurological Diseases
RTA 901 is the lead product candidate from our Hsp90 modulator program, which includes highly potent and selective C-terminal modulators of Hsp90. We have observed favorable activity of RTA 901 in a range of preclinical models of neurological disease, including models of diabetic neuropathy, neuroinflammation, and neuropathic pain.
Historically, other companies have explored N-terminal Hsp90 inhibitors for cancer therapeutics; however, this approach has been associated with multiple AEs including peripheral neuropathy and ocular toxicity. Binding at the C-terminus of Hsp90 leads to increased transcription of Hsp70, a cytoprotective and molecular chaperone gene, which facilitates cell survival in response to stress without the deleterious activities of N-terminal inhibition.
In preclinical rodent disease models, we observed that RTA 901 administered orally once-daily rescued existing nerve function, restored thermal and mechanical sensitivity, and improved nerve conductance velocity and mitochondrial function. These effects are dose-dependent, reversible, and Hsp70-dependent.
We completed a Phase 1 SAD/MAD trial of oral, once-daily RTA 901 in healthy adult volunteers to evaluate the safety, tolerability, and pharmacokinetic (PK) profile. The PK was approximately dose-proportional up to the highest doses evaluated with a half-life ranging from two to nine hours. Human exposures easily exceeded the exposures necessary for efficacy in multiple animal models. No safety or tolerability concerns were reported. In the third quarter of 2022, we completed additional Phase 1 clinical pharmacology studies of RTA 901, including a drug-drug interaction study which demonstrated an acceptable profile. We are finalizing the design of a randomized, double-blind placebo-controlled Phase 2 trial of RTA 901 in patients with diabetic peripheral neuropathic pain and are re-evaluating the timing to start the trial. We are the exclusive licensee of RTA 901 and have worldwide commercial rights.
Programs in Chronic Kidney Disease
We and Kyowa Kirin, our strategic collaborator in CKD in Japan, are developing bardoxolone for the treatment of CKD in multiple indications, including CKD caused by Alport syndrome, ADPKD, and type 1 and 2 diabetic 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). eGFR is an estimate of GFR that nephrologists use to track the decline in kidney function and progression of CKD. When GFR gets too low, patients develop end-stage kidney disease (ESKD) and require dialysis or a kidney transplant to survive.
Bardoxolone in Patients with CKD Caused by Alport Syndrome
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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 and can manifest as early as the first decade of life and causes average annual declines in eGFR of approximately four to five mL/min/1.73 m2. 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 currently no approved therapies to treat CKD caused by Alport syndrome.
The Alport Syndrome Foundation has estimated that Alport syndrome affects approximately 30,000 to 60,000 people in the United States. According to data provided by IQVIA in 2020, there are approximately 14,000 projected patients diagnosed with Alport syndrome in all stages of CKD in the United States. However, recent literature suggests that a large number of patients with Alport syndrome are either undiagnosed or misdiagnosed with other forms of CKD.
On February 25, 2022, we received a CRL from the FDA with respect to its review of our NDA for bardoxolone in the treatment of patients with CKD caused by Alport syndrome. The CRL indicated that the FDA cannot approve the NDA in its present form. Based on its review, the FDA concluded that it does not believe the submitted data demonstrates that bardoxolone is effective in slowing the loss of kidney function in patients with Alport syndrome and reducing the risk of progression to kidney failure and requested additional data to support the efficacy and safety of bardoxolone. Their conclusion was based on efficacy and safety concerns primarily set forth in the FDA’s briefing book and discussed at the Cardiovascular and Renal Drugs Advisory Committee meeting held on December 8, 2021.
The FDA stated that the issues could be resolved by providing evidence of effectiveness that includes evidence from an adequate and well-controlled study showing a clinically relevant effect on the rate of loss of kidney function in patients with Alport syndrome or, alternatively, an effect on a clinical outcome (i.e., an endpoint that captures how patients with Alport syndrome feel, function, or survive). In addition, the FDA stated that we would need to address whether bardoxolone has a clinically relevant effect on the QT interval and show that the demonstrated clinical benefits of bardoxolone outweigh its risks.
We recently completed a Type C meeting to discuss the program with the FDA. While we have not yet received minutes from the meeting, based on the preliminary comments and subsequent discussion during the meeting, the Division reiterated its concerns included in the CRL. The Division stated that we will need a new trial in patients with Alport syndrome to demonstrate a clinically meaningful effect on the rate of loss of kidney function or, alternatively, show an effect on clinical outcomes, and that the benefits outweigh the risks. It also stated that we will need to provide data demonstrating that the treatment effect accrues over time to support a claim that bardoxolone slows the loss of kidney function in patients with Alport syndrome, although these results do not need to be statistically significant. We are considering our next steps for the Alport syndrome program.
In October 2021, we submitted an MAA to the EMA for bardoxolone in the treatment of patients with CKD caused by Alport syndrome. In the first quarter of 2022, we received the 120-day list of questions from the EMA and submitted responses in the third quarter. We received the Rapporteurs Day-150 CHMP and PRAC response assessment report which contains comments on our responses. The assessment includes two major objections that preclude the recommendation of marketing authorization, in addition to a list of other concerns that must be addressed. The first major objection pertains to the uncertainty of whether there are additional major and/or active plasma metabolites that require additional in vivo, in vitro, and human metabolite studies to evaluate the metabolism of bardoxolone methyl. The second major objection pertains to the uncertainties regarding clinical safety, including a potential negative effect on renal function associated with long-term bardoxolone treatment. We recently received the draft CHMP Day 180 list of outstanding issues which indicates that the MAA will not be approvable based on major objections identified. We expect to receive the 180-day list of outstanding issues before year end and will determine next steps with the application after receipt of this final report.
Bardoxolone in Patients with Autosomal Dominant Polycystic Kidney Disease
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. Inflammation appears to play a role in cyst growth and is associated with disease progression in ADPKD.
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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 and an estimated prevalent population of 400,000 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. The only therapy currently approved for ADPKD is JYNARQUE® (tolvaptan), developed by Otsuka Pharmaceuticals Co., Ltd., which was approved in the United States in 2018 to slow kidney function decline in adults at risk of rapidly progressing ADPKD.
We are currently enrolling patients in FALCON, an international, multi-center, randomized, double-blind, placebo-controlled trial studying the safety and efficacy of bardoxolone in patients with ADPKD randomized one-to-one to active drug or placebo. FALCON is enrolling 850 patients in a broad range of ages, with an eGFR between 30 and 90 mL/min/1.73 m2. The primary endpoint of the study is the off-treatment eGFR change from baseline at Week 108 (eight weeks after planned drug discontinuation at Week 100). All patients will be asked to return at Week 108 independent of the time of study drug discontinuation. The secondary endpoint is the eGFR change from baseline at Week 100. More than 605 patients are currently enrolled in the trial.
In the first quarter of 2022, we finalized a protocol amendment to FALCON, and we have now secured approval of the amendment with the relevant health authorities. The major protocol amendment modifications include changing the primary endpoint of off-treatment eGFR change from baseline at Week 52 (or four weeks after drug discontinuation in Year 1) to eGFR change from baseline at Week 108 (eight weeks after planned drug discontinuation at Week 100).
AYAME Trial in Diabetic CKD Conducted by Kyowa Kirin
Upon completion of Kyowa Kirin’s Phase 2 TSUBAKI trial of bardoxolone in patients with Stage 3 and 4 diabetic CKD in Japan, and after discussions with the Pharmaceuticals and Medical Devices Agency, Kyowa Kirin initiated a Phase 3 outcomes trial called AYAME in patients with Stage 3 or 4 diabetic CKD in Japan. The primary endpoint is time to onset of a ≥ 30% decrease in eGFR from baseline or ESKD. The secondary endpoints are time to onset of a ≥ 40% decrease in eGFR from baseline or ESKD, time to onset of a ≥ 53% decrease in eGFR from baseline or ESKD, time to onset of ESKD, and change in eGFR from baseline at each evaluation time point. Kyowa Kirin completed patient enrollment in AYAME in June 2019 and expects the last patient visit to occur in the second half of 2022 with topline data available in the first half of 2023.
United States Commercial Readiness
We have advanced commercial launch preparations in the United States and are building the infrastructure necessary to support the commercialization of omaveloxolone for the treatment of Friedreich’s ataxia, if and when we receive regulatory approval.
Our ability to launch omaveloxolone is dependent on the successful defense of an NDA and approval by the FDA. Our leadership team is in place to support our core commercial functions including Marketing, Market Access, Sales and Operations. Infrastructure development, including systems and processes necessary for the launch of omaveloxolone are also underway. We have designed patient access programs and our product distribution network. The payer field team has been hired and deployed. Hiring of the sales leadership team is underway and we intend to onboard our sales organization and reimbursement specialists in the first quarter of 2023, pending regulatory advancement. We have identified the health care providers currently treating Friedreich’s ataxia patients. Customer targeting and segmentation is complete, and our branded launch campaign development is underway. Additionally, we are expanding quality and compliance functions to support commercialization. A trade name for omaveloxolone has been selected.
We continue to work on completing the manufacturing of omaveloxolone’s commercial drug supply, in anticipation of a launch in the United States.
Ex-United States Commercial Readiness
Our ability to launch omaveloxolone is dependent on the successful filing and defense of an MAA and approval by EMA or other regulatory agencies. Outside of the United States, where appropriate and depending on the terms of our contractual arrangements, we plan, either alone, or with new collaboration partners, to commercialize our products. Our strategic collaborator Kyowa Kirin has all rights to commercialize bardoxolone in its territories. We are refining our strategy and market assessments with respect to potential launches in the EU, and we continue to evaluate market
33
opportunities for our products in other global markets. Commercial launch preparation for omaveloxolone in Friedreich’s ataxia outside of the United States will advance in step with the regulatory progress.
Corporate 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 Kyowa Kirin, from sales of our securities, secured loans, and 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 Kyowa Kirin, from the Development Agreement with BXLS, and from reimbursements of expenses under the terms of our agreement with Kyowa Kirin. We have incurred losses in each year since our inception, other than in 2014. As of September 30, 2022, we had $31.9 million of cash and cash equivalents, marketable debt securities of $404.0 million and an accumulated deficit of $1,482.0 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 Kyowa Kirin, 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, seek regulatory approval for, and potentially commercialize 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.
The probability of success for each of our product candidates and clinical programs and our ability to generate product revenue and become profitable depend upon a variety of factors, including the quality of the product candidate, clinical results, investment in the program, competition, manufacturing capability, commercial viability, and our collaborators’ ability to successfully execute our development and commercialization plans. We will also require additional capital through equity, debt, or royalty financings or collaboration arrangements in order to fund our operations and execute on our business plans, and there is no assurance that such financing or arrangements will be available to us on commercially reasonable terms or at all. 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, 2021.
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 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 the Kyowa Kirin Agreement, the AbbVie License Agreement, and the Collaboration Agreement and consists of upfront payments and milestone payments. License revenue recorded with respect to the Kyowa Kirin Agreement, the AbbVie License Agreement, and the 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 our license and collaboration agreements are deferred and recognized ratably over the expected term of the performance obligations under each agreement. Under the Reacquisition Agreement, we no longer have performance obligations under the AbbVie License Agreement and the Collaboration Agreement. Under the Kyowa Kirin Agreement, we will not recognize any deferred revenue subsequent to June 30, 2022.
34
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 September 30, 2022, we have incurred a total of $1,212.5 million in research and development expense, a majority of which relates to the development of bardoxolone and 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 candidates 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;
•laboratory and vendor expenses related to the execution of preclinical 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 CROs that conduct and manage clinical trials and preclinical studies 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.
To date, we have not experienced material 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, Kyowa Kirin has allowed us to conduct clinical studies of bardoxolone in certain rare forms of kidney diseases in Japan and has reimbursed us the majority of the costs for our CARDINAL study in Japan. Kyowa Kirin is the in-country caretaker in our FALCON study in Japan and we are reimbursing Kyowa Kirin for the costs of a certain number of patients in the study.
35
The following table summarizes our research and development expenses incurred during the three and nine months ended September 30, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30 |
|
|
September 30 |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
(in thousands) |
|
Bardoxolone |
|
$ |
8,015 |
|
|
$ |
13,634 |
|
|
$ |
22,432 |
|
|
$ |
40,000 |
|
Omaveloxolone |
|
|
9,591 |
|
|
|
3,475 |
|
|
|
24,472 |
|
|
|
6,429 |
|
RTA 901 |
|
|
3,089 |
|
|
|
1,164 |
|
|
|
6,722 |
|
|
|
4,991 |
|
Other research and development expenses |
|
|
22,790 |
|
|
|
21,157 |
|
|
|
68,994 |
|
|
|
62,957 |
|
Total research and development expenses |
|
$ |
43,485 |
|
|
$ |
39,430 |
|
|
$ |
122,620 |
|
|
$ |
114,377 |
|
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 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 increase 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 premiums, 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 (expense) includes interest and gains earned on our cash and cash equivalents, and marketable debt securities, amortization of debt issuance costs, imputed interest on long term payables, foreign currency exchange gains and losses, 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. Realization of deferred tax assets is generally dependent upon future earnings by jurisdiction, of which the timing and amount are uncertain for the majority of our deferred tax assets, and valuation allowances are maintained against them. Changes in valuation allowances also affect the tax provision.
36
Results of Operations
Comparison of the Three Months Ended September 30, 2022 and 2021 (unaudited)
The following table sets forth our results of operations for the three months ended September 30:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
2021 |
|
|
Change $ |
|
|
Change % |
|
|
|
(in thousands, except for percentage data) |
|
Collaboration revenue |
|
|
|
|
|
|
|
|
|
|
|
|
License and milestone |
|
$ |
— |
|
|
$ |
5,529 |
|
|
$ |
(5,529 |
) |
|
|
(100 |
) |
Other revenue |
|
|
540 |
|
|
|
1,862 |
|
|
|
(1,322 |
) |
|
|
(71 |
) |
Total collaboration revenue |
|
|
540 |
|
|
|
7,391 |
|
|
|
(6,851 |
) |
|
|
(93 |
) |
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
43,485 |
|
|
|
39,430 |
|
|
|
4,055 |
|
|
|
10 |
|
General and administrative |
|
|
27,270 |
|
|
|
25,736 |
|
|
|
1,534 |
|
|
|
6 |
|
Depreciation |
|
|
272 |
|
|
|
320 |
|
|
|
(48 |
) |
|
|
(15 |
) |
Total expenses |
|
|
71,027 |
|
|
|
65,486 |
|
|
|
5,541 |
|
|
|
8 |
|
Other income (expense), net |
|
|
(8,515 |
) |
|
|
(13,751 |
) |
|
|
5,236 |
|
|
|
38 |
|
Loss before taxes on income |
|
|
(79,002 |
) |
|
|
(71,846 |
) |
|
|
(7,156 |
) |
|
|
(10 |
) |
Benefit from (provision for) taxes on income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
** |
|
Net loss |
|
$ |
(79,002 |
) |
|
$ |
(71,846 |
) |
|
$ |
(7,156 |
) |
|
|
(10 |
) |
** Percentage not meaningful
Revenue
License and milestone revenue represented approximately 0% and 75% of total revenue for the three months ended September 30, 2022 and 2021, respectively. License and milestone revenue decreased by 100%, primarily due to the Company reaching the end of the performance obligation of the Kyowa Kirin Agreement as of June 30, 2022.
Other revenue decreased in the three months ended September 30, 2022, compared to the three months ended September 30, 2021, primarily due to a decrease in reimbursements of expenses from Kyowa Kirin for manufacturing and non-clinical study expenses incurred.
Expenses
The following table summarizes our expenses, including as a percentage of total expenses, for the three months ended September 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
% of Total Expenses |
|
|
2021 |
|
|
% of Total Expenses |
|
|
|
(in thousands, except for percentage data) |
|
Research and development |
|
$ |
43,485 |
|
|
|
61 |
% |
|
$ |
39,430 |
|
|
|
60 |
% |
General and administrative |
|
|
27,270 |
|
|
|
38 |
% |
|
|
25,736 |
|
|
|
39 |
% |
Depreciation |
|
|
272 |
|
|
|
1 |
% |
|
|
320 |
|
|
|
1 |
% |
Total expenses |
|
$ |
71,027 |
|
|
|
|
|
$ |
65,486 |
|
|
|
|
37
Research and Development Expenses
Research and development expenses increased by $4.1 million, or 10%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. The increase is due to personnel and personnel-related costs to support the product development activities.
Research and development expenses, as a percentage of total expenses, was 61% and 60% for the three months ended September 30, 2022 and 2021, respectively. The increase of 1% was due to the proportionately larger increase in research and development expenses, compared to general and administrative expenses.
General and Administrative Expenses
General and administrative expenses increased by $1.5 million, or 6%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. The increase was primarily due to rent expense related to the new headquarters building lease that commenced in December 2021.
General and administrative expenses, as a percentage of total expenses, was 38% and 39%, for the three months ended September 30, 2022 and 2021, respectively. The decrease of 1% was due to the proportionately larger increase in research and development expenses, compared to general and administrative expenses.
Other Income (Expense), Net
Other income (expense), net decreased by $5.2 million for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. The decrease was primarily due to a $1.7 million decrease of interest expense attributable to the payable to AbbVie under to the Reacquisition Agreement, which was fully satisfied in 2021, by a $1.3 million decrease in effective interest rate in non-cash interest expense on liability related to the sale of future royalties, and by a $2.2 million increase in interest income generated from marketable debt securities.
Benefit from (Provision for) Taxes on Income
Benefit from taxes on income for the three months ended September 30, 2022 remained consistent when compared to the three months ended September 30, 2021.
Results of Operations
Comparison of the Nine Months Ended September 30, 2022 and 2021 (unaudited)
The following table sets forth our results of operations for the nine months ended September 30, 2022:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
2021 |
|
|
Change $ |
|
|
Change % |
|
|
|
(in thousands, except for percentage data) |
|
Collaboration revenue |
|
|
|
|
|
|
|
|
|
|
|
|
License and milestone |
|
$ |
1,648 |
|
|
$ |
7,127 |
|
|
$ |
(5,479 |
) |
|
|
(77 |
) |
Other revenue |
|
|
568 |
|
|
|
3,430 |
|
|
|
(2,862 |
) |
|
|
(83 |
) |
Total collaboration revenue |
|
|
2,216 |
|
|
|
10,557 |
|
|
|
(8,341 |
) |
|
|
(79 |
) |
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
122,620 |
|
|
|
114,377 |
|
|
|
8,243 |
|
|
|
7 |
|
General and administrative |
|
|
77,254 |
|
|
|
68,440 |
|
|
|
8,814 |
|
|
|
13 |
|
Depreciation |
|
|
853 |
|
|
|
880 |
|
|
|
(27 |
) |
|
|
(3 |
) |
Total expenses |
|
|
200,727 |
|
|
|
183,697 |
|
|
|
17,030 |
|
|
|
9 |
|
Other income (expense), net |
|
|
(27,858 |
) |
|
|
(39,530 |
) |
|
|
11,672 |
|
|
|
30 |
|
Loss before taxes on income |
|
|
(226,369 |
) |
|
|
(212,670 |
) |
|
|
(13,699 |
) |
|
|
(6 |
) |
Benefit from (provision for) taxes on income |
|
|
(30 |
) |
|
|
669 |
|
|
|
(699 |
) |
|
** |
|
Net loss |
|
$ |
(226,399 |
) |
|
$ |
(212,001 |
) |
|
$ |
(14,398 |
) |
|
|
(7 |
) |
** Percentage not meaningful
38
Revenue
License and milestone revenue represented approximately 74% and 68% of total revenue for the nine months ended September 30, 2022 and 2021, respectively, and consisted of the recognition of Kyowa Kirin deferred revenue. License and milestone revenue decreased by $5.5 million, or 77% during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to the achievement of a regulatory milestone in July 2021, variable consideration previously considered constrained, under the Kyowa Kirin Agreement.
Other revenue decreased by $2.9 million, or 83%, in the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to a decrease in reimbursements of expenses from Kyowa Kirin for manufacturing and non-clinical study expenses incurred.
Expenses
The following table summarizes our expenses, including as a percentage of total expenses, for the nine months ended September 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
% of Total Expenses |
|
|
2021 |
|
|
% of Total Expenses |
|
|
|
(in thousands, except for percentage data) |
|
Research and development |
|
$ |
122,620 |
|
|
|
61 |
% |
|
$ |
114,377 |
|
|
|
62 |
% |
General and administrative |
|
|
77,254 |
|
|
|
38 |
% |
|
|
68,440 |
|
|
|
37 |
% |
Depreciation |
|
|
853 |
|
|
|
1 |
% |
|
|
880 |
|
|
|
1 |
% |
Total expenses |
|
$ |
200,727 |
|
|
|
|
|
$ |
183,697 |
|
|
|
|
Research and Development Expenses
Research and development expenses increased by $8.2 million, or 7% for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. The increase was primarily due to increased personnel and personnel-related costs to support the product development activities.
Research and development expenses, as a percentage of total expenses, was 61% and 62% for the nine months ended September 30, 2022 and 2021, respectively. The decrease of 1% was due to the proportionately larger increase in general and administrative expenses, compared to research and development expenses.
General and Administrative Expenses
General and administrative expenses increased by $8.8 million, or 13%, for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. The increase was primarily due to rent expense related to the new headquarters building lease that commenced in December 2021.
General and administrative expenses, as a percentage of total expenses, was 38% and 37%, for the nine months ended September 30, 2022 and 2021, respectively. The increase of 1% was due to the proportionately larger increase in general and administrative expenses, compared to research and development expenses.
Other Income (Expense), Net
Other income (expense), net decreased by $11.7 million for the nine months ended September 30, 2022,compared to the nine months ended September 30, 2021. The decrease was primarily due to a $5.2 million decrease of interest expense attributable to the payable to AbbVie under to the Reacquisition Agreement, which was fully satisfied in 2021, by a $3.5 million decrease in effective interest rate in non-cash interest expense on liability related to the sale of future royalties, and by a $3.0 million increase in interest income generated from marketable debt securities.
We periodically reassess the expected royalty payments under the Development Agreement, and to the extent such payment is greater or less than the initial estimate, we adjust the amortization. Based on our review in the first quarter of 2022, we lowered our previous estimate of future sales for which royalties will be paid. Accordingly, we have prospectively adjusted and recognized lower non-cash interest expense for the nine months ended September 30, 2022.
39
Benefit from (Provision for) Taxes on Income
For the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, taxes increased by $0.7 million, primarily related to benefit recognized in 2021 from interest earned on tax refunds related to 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, the sale of royalty interests, and secured loans. Through September 30, 2022, we have raised gross cash proceeds of $476.6 million through the sale of convertible preferred stock and $785.0 million from payments under license and collaboration agreements. We also obtained $1,222.1 million in net proceeds from our initial public offering, follow-on offerings, and the sale of our Class A common stock under the Purchase Agreement, and $299.0 million in net proceeds from the sale of future royalties under the Development Agreement. We have not generated any revenue from the sale of any products. As of September 30, 2022, we had available cash and cash equivalents of approximately $31.9 million and marketable debt securities of $404.0 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 nine months ended September 30:
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
2021 |
|
|
|
(in thousands) |
|
|
|
|
|
Net cash (used in) provided by: |
|
|
|
|
|
|
Operating activities |
|
$ |
(153,841 |
) |
|
$ |
(112,769 |
) |
Investing activities |
|
|
(405,670 |
) |
|
|
(1,136 |
) |
Financing activities |
|
|
1,171 |
|
|
|
8,967 |
|
Net change in cash and cash equivalents |
|
$ |
(558,340 |
) |
|
$ |
(104,938 |
) |
Operating Activities
Net cash used in operating activities was $153.8 million for the nine months ended September 30, 2022, consisting primarily of a net loss of $226.4 million adjusted for non-cash items including stock-based compensation expense of $43.8 million, non-cash interest expense on liability related to sale of future royalty of $30.8 million, and a net decrease in operating assets and liabilities of $1.7 million. The change in operating assets and liabilities that impacted our use of cash in operations include a decrease of $6.2 million in accounts payable due to timing of payments, and a increase of $2.9 in prepaids and other assets, and a decrease of $1.6 million in deferred revenue, offset by an increase of $2.5 million in direct research and other current and long-term liabilities and a $6.7 million increase in operating lease obligations.
Net cash used in operating activities was $112.8 million for the nine months ended September 30, 2021, consisting primarily of a net loss of $212.0 million adjusted for non-cash items including stock-based compensation expense of $41.6 million, non-cash interest expense on liability related to sale of future royalty of $34.3 million, depreciation, amortization of issuance costs, and imputed interest expense of $6.2 million, and a net decrease in operating assets and liabilities of $17.1 million. The significant items in the change in operating assets that impacted our use of cash in operations include a decrease of $22.2 million in income tax receivable due to the receipt of a CARES Act refund, a decrease of $3.1 million in accounts payable due to timing of payments, and a decrease in deferred revenue of $2.1 million.
40
Investing Activities
Net cash used in investing activities was $405.7 million and $1.1 million for the nine months ended September 30, 2022 and 2021, respectively. The increase is due to the purchase of $477.8 million in marketable debt securities during the period, offset by cash received from maturities of marketable securities.
Financing Activities
Net cash provided by financing activities was $1.2 million and $9.0 million for the nine months ended September 30, 2022 and 2021, respectively, primarily consisting of stock options exercises.
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, including those described under the heading “Risk Factors” included in our most recent Annual Report on Form 10-K, 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.
In October 2019, we entered into the 2019 Lease Agreement, relating to a new headquarter building lease of approximately 327,400 square feet of office and laboratory space located in Plano, Texas.
•In December 2021, we obtained control of the building, and, accordingly, we recorded related right-of-use assets and the lease liabilities during the fourth quarter of 2021.
•We have paused the tenant improvement activities for the new headquarter building and are attempting to sublease the building. At this point, we will not spend the earlier-planned $50 million in capital expenditures. If at a future date we determine to move into the building, capital expenditures will need to be incurred based on our occupancy requirements at that time.
•The initial term of the lease is 16 years, with up to ten years of extension at our option. The annual base rent payment, which began in June 2022, will be determined based on the project cost, subject to an initial annual cap of approximately $13.3 million. 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.
In July 2021, Kyowa Kirin announced the submission of an NDA in Japan for bardoxolone for improvement of renal function in patients with Alport syndrome. We earned a $5.0 million milestone related to this event that was received and began to be recognized in the third quarter of 2021.
In December 2020, we closed a follow-on underwritten public offering of 2,000,000 shares of our Class A common stock for gross proceeds of $281.7 million. Net proceeds to us from the offering were approximately $277.5 million, after deducting underwriting discounts and commissions and offering expenses.
In June 2020, we closed on the Development Agreement and Purchase Agreement, each dated June 10, 2020, under which certain BXLS 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.
Our longer term liquidity requirements will require us to raise additional capital, such as through additional equity, debt, or royalty financings or collaboration arrangements. Our future capital requirements will depend on many factors, including the receipt of milestones under our Kyowa Kirin Agreement and the timing of our expenditures related to clinical trials. We believe our existing cash and cash equivalents will be sufficient to enable us to fund our operations through the fourth quarter of 2024. However, we anticipate opportunistically raising
41
additional capital before that time through equity offerings, collaboration or license agreements, additional debt financings, 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 royalty financing. Additional securities may include common stock, preferred stock, or debt securities. We may explore strategic collaborations or license arrangements for any of our 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, loans, royalty financings, and collaboration or license transactions. Recent and continued volatility in global financial markets 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. Furthermore, the recent rise in interest rates would make debt financing more expensive. 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, 2021.
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;
•the costs of development efforts for our product candidates that are not subject to reimbursement from our collaborators;
•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 collaboration with Kyowa Kirin and entry into new collaborations and the receipt of any collaboration payments;
•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 or 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;
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•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, or delays in clinical trials we experience, 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
We have various contractual obligations and other commitments that require payments at certain specified periods. The following table summarizes our contractual obligations and commitments as of September 30, 2022 (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period |
|
|
|
Less than 1 year |
|
|
1 to 3 years |
|
|
4 to 5 years |
|
|
6 years and beyond |
|
|
Total |
|
|
|
(unaudited, in thousands) |
|
Operating lease obligations(1) |
|
$ |
13,637 |
|
|
$ |
17,865 |
|
|
$ |
28,101 |
|
|
$ |
172,571 |
|
|
$ |
232,174 |
|
Total contractual obligations |
|
$ |
13,637 |
|
|
$ |
17,865 |
|
|
$ |
28,101 |
|
|
$ |
172,571 |
|
|
$ |
232,174 |
|
(1) Above table assumes one year rent abatement is applied beginning in June 2023 following FDA approval of omaveloxolone.
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 4, Liability Related to Sale of Future Royalties, to Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.
Clinical Trials
As of September 30, 2022, 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 U.S. GAAP. 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 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. There have been no changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31, 2021.
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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, Summary of Significant Accounting Policies, of Notes to Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.