Reata Pharmaceuticals is readying its lead drug, a potential treatment for a rare, genetic form of chronic kidney disease called Alport syndrome, for an FDA filing this year. New York private equity giant Blackstone Group, via its newly flush life sciences investment arm, is betting $350 million that the treatment will be a big seller for that and related indications.
The Plano, TX-based biotech announced Thursday that funds managed by Blackstone Life Sciences—a Blackstone (NYSE: [[ticker:BX]]) division that as of January had raised nearly $3.5 billion—had agreed to make a royalty and equity investment.
The deal includes a Blackstone outlay of $300 million for the rights to royalties on sales of bardoxolone methyl by Reata (NASDAQ: [[ticker:RETA]]) and its licensees. In addition, the Blackstone funds will purchase about $50 million-worth of Reata shares at $146.72 apiece. That’s a 12 percent premium to Reata’s closing stock price on Wednesday.
Sales of bardoxolone by Kyowa Kirin, which about 10 years ago inked an agreement for the rights to develop and commercialize the investigational drug in Japan and other Asian markets, are excluded from the agreement.
The investment comes seven months after Reata’s bardoxolone met the main goal of a Phase 3 clinical trial, improving Alport syndrome patients’ kidney function compared to a placebo after 48 months of treatment. No FDA-approved treatments exist for the condition, in which genetic mutations cause progressive loss of kidney function. An estimate by the Alport Syndrome Foundation puts the number of people in the US with the condition at 30,000 to 60,000.
Based on the results of the pivotal study, Reata has said it expects to submit its drug for FDA review by year’s end. The once-daily oral therapy is designed to activate the transcription factor Nrf2, and in doing so resolve inflammation caused by subpar functioning of patients’ mitochondria, the organelles that turn food into the energy that cells need to survive. If bardoxolone receives regulatory approval, it would be poised to become Reata’s first commercial product.
Reata’s small molecule is also being evaluated in a Phase 3 trial as a potential treatment for autosomal dominant polycystic kidney disease as well as in mid-stage trials for patients with the kidney disease IgA nephropathy, chronic kidney disease associated with type 1 diabetes, and a condition that causes kidney scarring known as focal segmental glomerulosclerosis.
The cash will also help Reata advance its other lead program, a drug called omaveloxolone that it is evaluating as a treatment for Friedreich’s ataxia and also plans to submit to the FDA for review this year. Reata plans to use the Blackstone money to expand its development and commercial capabilities ahead of the agency’s rulings on the bardoxolone and omaveloxolone programs.
For both small molecules, “we’ve had to make hard decisions about what [additional disease indications] we could move forward with,” CEO Warren Huff said on a conference call. “This will definitely help us in providing additional resources to move up our timeframes for some of these other follow-on indications.”
Investors appeared to like Blackstone’s bet: Reata’s shares soared 28 percent to $167.68 Thursday. The company priced its shares at $11 apiece when it went public in 2016.
Reata, which reported cash and equivalents of $624.5 million as of March 31, said the fresh funds extend the time it can operate on cash alone from 2021 to the end of 2023.
But benefits of the deal go beyond the cash: The experience of the Blackstone Life Sciences team in drug development and commercialization will also boost Reata’s efforts to move ahead its pipeline, Huff says.
“More than capital, the investment establishes a relationship between Blackstone and Reata that is by itself a source of value,” he said.
The companies anticipate the deal will close this month.
