Bardoxolone Blow-Up: Reata/Abbott CKD Drug Halted In Phase III
This article was originally published in Pharmaceutical Approvals Monthly
Executive Summary
Reata has terminated the Phase III BEACON trial for its chronic kidney disease hopeful bardoxolone methyl, partnered with Abbott, due to safety concerns.
Reata Pharmaceuticals Inc. has terminated a Phase III program for its chronic kidney disease candidate bardoxolone methyl due to safety, the company announced Oct. 18. The news will fall like an ax on Reata’s investors and also have negative implications for Abbott Laboratories Inc., which paid handsomely to partner with Reata on bardoxolone and potential second-generation compounds.
The 2,000-patient BEACON trial was stopped early due to excess serious adverse events and mortality in the bardoxolone arm, possibly spelling the death knell for the late-stage asset, which has been viewed as a multi-blockbuster opportunity.
It is unclear whether the concerns extend to other antioxidant inflammation modulators.
“We will continue our commitment to patient safety and developing medicines for intractable diseases by closely examining the data from this trial to determine if there is an appropriate path forward for the development of bardoxolone methyl in chronic kidney disease or other indications and for our other AIM compounds,” Reata said in a statement. Reata declined to provide any additional details, including how long the review will take and potential read-across to other molecules in development.
The first-in-class antioxidant inflammation modulator (AIM) that activates the Nrf2 pathway was being tested for its ability to slow the progression of CKD – or even reverse the course of the disease. If the trial was successful, bardoxolone would have represented a significant treatment advance for patients with the disease, who currently progress through four stages of disease until they move onto dialysis, a life-altering treatment and a drain on the health care system.
The news highlights yet again the challenges that persist in late-stage drug development (Also see "Cruel Summer: High-Profile Trial Failures Dominate R&D News Flow" - Pink Sheet, 1 Sep, 2012.). In a Phase IIb trial that enrolled 227 patients, bardoxolone significantly improved kidney function in patients with advanced CKD and type 2 diabetes, with the most frequently reported adverse event in the treatment group being muscle spasm. The Phase III trial was expected to read out in 2013, and Reata and Abbott had targeted 2014 for a potential commercial launch.
Reata Will Feel The Pain, Abbott Less So
For Reata, the termination is a major blow, one all the more powerful if the concerns extend to the company’s other AIMs in development. It is unclear if that may be the case. Bardoxolone is the company’s lead asset, and although Reata fetched a high upfront from Abbott in 2010 in exchange for ex-U.S. rights to the drug, it retains sole U.S. marketing rights. Abbott paid $450 million upfront for ex-U.S. rights to bardoxolone (excluding some Asian territories where the drug is partnered with Kyowa Hakko Kirin Co. Ltd.) and offered to pay $350 million in development and regulatory milestones [See Deal].
One year later, Abbott again partnered with Reata to develop and commercialize second-generation AIMs for multiple therapeutic areas including pulmonary conditions, central nervous system disorders and immunology. Abbott paid another $400 million upfront for global rights to multiple candidates and agreed to split profits and costs with Reata [See Deal].
While Reata investors were fortunate to receive generous upfronts from Abbott, with the help of hindsight, some surely will wish now that management had brokered an acquisition instead. It’s impossible not to draw parallels between Abbott/Reata and Bristol-Myers Squibb Co./Inhibitex Inc., which also experienced a high-profile clinical trial termination in August, for a Phase II nucleoside polymerase inhibitor for hepatitis C (Also see "Bristol Discontinues Development Of Inhibitex Nuc, Will Take $1.8 Billion Hit" - Pink Sheet, 24 Aug, 2012.). Only in that situation, the brunt of the hit was taken by Bristol, which had acquired Inhibitex outright seven months earlier for $2.5 billion, an attractive return for the company’s investors [See Deal].
Abbott will also feel the setback, and even more so given that the timing of the announcement comes just months before the company is set to break out its proprietary pharmaceutical business into a standalone company called AbbVie. The company announced plans to break Abbott into two companies a year ago, and it is on track to take place Jan. 1 (Also see "Abbott To Split Into Two Publicly Traded Companies Over Next 12 Months" - Pink Sheet, 19 Oct, 2011.).
Bardoxolone has been held up by management and viewed by investors to be a future cornerstone of AbbVie and an eventual growth engine for the company as its dominant Humira (adalimumab) franchise matures. Ironically, Reata broke the news about the trial one day after Abbott’s management outlined plans and financials for AbbVie and even mentioned bardoxolone as a key Phase III asset (Also see "Abbvie: A Glimpse Of What The New Biopharma Will Look Like" - Pink Sheet, 17 Oct, 2012.).
Still, AbbVie’s $18 billion in sales and broad pipeline means the impact of bardoxolone will be felt less acutely over the long term. And luckily for AbbVie, Abbott has released a spate of good news around its HCV pipeline – demonstrating strong SVR rates with an interferon-free triple combination – in recent months, taking investors somewhat by surprise.
Abbott’s stock fell 3.4% on the news, closing Oct. 18 at $66.64. “The [sum of the parts] valuation of Abbott had largely risen as the proprietary pharmaceutical business benefited from expanding pharmaceutical multiples as well as from positive HCV news,” Barclays analyst C. Anthony Butler said in an Oct. 18 note. “This setback would likely result in a lowering of the multiples used to value the ABBV side of the business.”
But Jefferies & Co. Inc.’s Jeffrey Holford said the dip in stock price represents a good time to buy. “From an AbbVie pro forma perspective, bardoxolone represented 1.7% and 3.4% of revenues and cash EPS, respectively,” he said. “With little or no positive cash flows that could have been expected from bardoxolone over the next few years (terminating actually has a near-term positive impact on cash flow), its termination has no impact on our expectations for either dividend or valuation.” Holford values AbbVie at $46 per share.