REATA PHARMACEUTICALS INC Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes and other financial information appearing in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, operations, and product candidates, includes forward-looking statements that involve risks and uncertainties. Factors that may cause actual results to differ materially from current expectations include, among other things, those described under the headings "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" and discussed elsewhere in this Quarterly Report on Form 10-Q.
We are a clinical-stage biopharmaceutical company focused on identifying, developing, and commercializing innovative therapies that change patients' lives for the better. We concentrate on small-molecule therapeutics with novel mechanisms of action for the treatment of severe, life-threatening diseases with few or no approved therapies. Our lead programs are omaveloxolone in FA and bardoxolone in rare forms of CKD. Both of our lead product candidates activate the transcription factor Nrf2 to normalize mitochondrial function, restore redox balance, and resolve inflammation. Because mitochondrial dysfunction, oxidative stress, and inflammation are features of many diseases, we believe omaveloxolone, bardoxolone, and our next-generation Nrf2 activators have many potential clinical applications. We possess exclusive, worldwide rights to develop, manufacture, and commercialize omaveloxolone, bardoxolone, and our next-generation Nrf2 activators, excluding certain Asian markets for bardoxolone in certain indications, which are licensed to Kyowa Kirin. In addition, we are developing RTA 901, the lead product candidate from our Hsp90 modulator program, in neurological indications. We are the exclusive licensee of RTA 901 and have worldwide commercial rights.
Recent key developments
Omaveloxolone for Friedreich’s Ataxia
The FDA has granted Fast Track Designation, Orphan Drug Designation, and Rare Pediatric Disease Designation to omaveloxolone for the treatment of FA. In
March 2022, we completed rolling submission of an NDA to the FDA for omaveloxolone for the treatment of patients with FA. This NDA is supported by the efficacy and safety data from the MOXIe Part 2 trial and additional supporting data from the MOXIe Part 1 and MOXIe Extension trials. We are continuing to complete the regulatory procedures and submissions required prior to filing a Marketing Authorization Application (MAA) in Europefor approval of omaveloxolone for the treatment of patients with FA. We have secured agreement on our Pediatric Investigation Plan with the Pediatric Committee, and we also received European Medicines Agency(EMA) Follow-Up Protocol Assistance feedback regarding our nonclinical and chemistry manufacturing controls (CMC) programs. The EMA feedback indicated that there were no identified impediments to our planned MAA submission and included agreement that certain nonclinical studies, including 2- year carcinogenicity study data, may be submitted after approval. We plan to submit an MAA to the European Medicines Agencyfor omaveloxolone in the fourth quarter of 2022.
RTA 901 for neurological indications including diabetic peripheral neuropathic pain
In the first quarter of 2022 we initiated additional Phase 1 clinical pharmacology studies of RTA 901, including a drug-drug interaction study. Following completion of these Phase 1 studies, we plan to initiate a randomized, double-blind placebo-controlled Phase 2 trial of RTA 901 in diabetic patients with peripheral neuropathic pain in the fourth quarter of 2022.
Bardoxolone in patients with CKD caused by Alport syndrome
We received a Complete Response Letter (CRL) from the FDA in
February 2022with respect to its review of our NDA for bardoxolone in the treatment of patients with CKD caused by Alport syndrome. The CRL indicated the FDA cannot approve the NDA in its present form. We will continue to work with the FDA to confirm our next steps on our Alport syndrome program. 16 -------------------------------------------------------------------------------- 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. We are in the process of preparing our responses. We requested a 90-day extension for our responses which was granted by the EMA. The timeline for the EMA's review cycle was therefore extended.
Bardoxolone in patients with autosomal dominant polycystic kidney disease (ADPKD)
We are currently enrolling patients in FALCON, a Phase 3, 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 patients in a broad range of ages with an estimated glomerular filtration rate (eGFR) between 30 and 90 mL/min/1.73 m2. More than 550 patients are currently enrolled in the trial. In the first quarter of 2022, we submitted a protocol amendment to the FALCON Phase 3 trial of bardoxolone in patients with ADPKD with the FDA and other relevant health authorities. As agreed with the FDA prior to submission of the amendment, we recently had a Type A meeting to discuss key changes made to the FALCON protocol. Based on the discussion during the meeting and the meeting minutes, the Division stated that the proposed primary endpoint of eGFR change from baseline at Week 108 (8 weeks after planned drug discontinuation at Week 100) was reasonable since the available data suggest that bardoxolone's acute pharmacodynamic effect on eGFR should be largely resolved. The Division provided guidance on handling of data from patients who completed Year 2 of the study before the protocol amendment and so did not have an eGFR assessment at Week 108. This included direction on imputing missing data for these patients in the primary analysis. The Division stated that, in addition to the primary endpoint, it will be important to demonstrate that the treatment effect accrues over time to support a claim that bardoxolone slows the loss of kidney function in patients with ADPKD and provided guidance on the statistical methodologies for the exploratory eGFR slope analyses. The FDA also confirmed that if FALCON is positive, it could support registration of bardoxolone in ADPKD.
Update on operations adjustments due to COVID-19
When COVID-19 emerged as a global pandemic in the first quarter of 2020, Reata was quick to respond and was an early adopter of a work-from-home policy, with the exception of the laboratory that continued to operate throughout under strict safety protocols. For all remote employees, we provided appropriate workstation equipment as well as training and resources to support employees' mental and emotional wellbeing. In the second quarter of 2021, Reata relaxed its policy and permitted employees to return to the office as required. Although the Omicron variant temporarily caused us to again restrict office attendance, in
February 2022we permitted modified work schedules to meet business and personal needs. Background: Our Programs
The following table presents each of our programs by indication and phase of development:
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1Continuing NDA submission completed in
2DPNP: Diabetic peripheral neuropathic pain.
17 -------------------------------------------------------------------------------- 3On
February 25, 2022, we received a CRL from the FDA. We will continue to work with the FDA to confirm our next steps on our Alport syndrome program. MAA in EU is under review.
4AYAME trial conducted in
5Based on the outcome of AYAME and FALCON trials, and our discussions with the FDA regarding the bardoxolone program, we will decide future development plans for bardoxolone in additional forms of CKD.
Neurological disease programs
We are developing omaveloxolone for the treatment of patients with FA, an inherited, debilitating, and degenerative neuromuscular disorder that is usually diagnosed during adolescence and can ultimately lead to premature death. In
March 2022, we completed rolling submission of our NDA for omaveloxolone for the treatment of patients with FA. Because mitochondrial dysfunction is a key feature of many neuromuscular diseases, we believe omaveloxolone may be broadly applicable to treat neurological diseases by activating Nrf2 to normalize and improve mitochondrial function and adenosine triphosphate (ATP) production. We plan to pursue the development of omaveloxolone and our other Nrf2 activators for one or more additional neurological diseases. We are also developing RTA 901 for the treatment of neurological diseases. RTA 901 is a highly potent and selective C-terminal modulator of Hsp90, which has a critical role in mitochondrial function, protein folding, and inflammation. RTA 901 has demonstrated profound efficacy in a wide range of animal models of neurological disease, including diabetic neuropathy, neuroinflammation, and neuropathic pain. We plan to initiate a randomized, placebo-controlled Phase 2 trial in DPNP in the fourth quarter of 2022.
Omaveloxolone in patients with Friedreich’s ataxia
Patients with FA experience progressive loss of coordination, muscle weakness, and fatigue, which commonly progress to motor incapacitation and wheelchair reliance. Based on literature and proprietary research, we believe FA affects approximately 5,000 children and adults in
the United Statesand 22,000 individuals globally. According to data provided by IQVIA in 2020, there are approximately 4,000 projected patients diagnosed with FA in the United States. The FDA has granted Orphan Drug Designation, Fast Track Designation, and Rare Pediatric Disease Designation to omaveloxolone for the treatment of FA. The European Commissionhas granted Orphan Drug Designation in Europeto omaveloxolone for the treatment of FA. Diagnosis of FA typically occurs by genetic testing, and most people in the United Stateswith FA are diagnosed in their teens and early twenties. Patients with FA experience progressive loss of coordination, muscle weakness, and fatigue that commonly results in motor incapacitation, with patients requiring a wheelchair in their twenties. The mean age of death for patients with FA is in the mid-thirties. Childhood-onset FA can occur as early as age five, is more common than later-onset FA, and normally involves more rapid disease progression. Currently, there are no approved therapies for the treatment of FA.
MOXIe Part 2 Trial Results
Part 2 of our Phase 2 trial, called MOXIe (MOXIe Part 2), was an international, multi-center, double-blind, placebo-controlled, randomized, Registrational trial that enrolled 103 patients with FA at 11 trial sites in
the United States, Europe, and Australia. MOXIe Part 2 was one of the largest global, interventional trials ever completed in FA. Patients were randomized one-to-one to omaveloxolone or placebo. MOXIe Part 2 was completed in October 2019. The primary analysis population excluded patients with pes cavus (n=82), a musculoskeletal foot deformity that may interfere with the patient's ability to perform some components of the neurological exam used to score the primary endpoint of the trial. Safety analyses were evaluated in the all-randomized population (n=103). The primary endpoint for the trial was the change in the Modified Friedreich's Ataxia Rating Scale (mFARS) score for omaveloxolone relative to placebo after 48 weeks of treatment. Omaveloxolone treatment demonstrated statistically significant evidence of efficacy for the primary endpoint of the trial, producing a placebo-corrected -2.40 point mean improvement in mFARS (n=82; p=0.014). Patients treated with omaveloxolone experienced a mean improvement in mFARS of -1.55 points from baseline, while patients treated with placebo experienced a mean worsening in mFARS of +0.85 points from baseline. Further, the observed placebo-corrected improvements in mFARS were time-dependent, increasing over the course of treatment with the largest improvement observed after 48 weeks of treatment. 18 -------------------------------------------------------------------------------- [[Image Removed: img70967532_1.jpg]] Additionally, all secondary endpoints either favored the omaveloxolone arm or were neutral. Patients on omaveloxolone experienced a nominal improvement in the Activities of Daily Living (ADL) questionnaire, with all nine questions favoring the omaveloxolone arm. On average, ADL scores for patients on omaveloxolone did not change from baseline, while placebo-treated patients worsened. Both patient global impression of change (PGIC) and clinical global impression of change numerically favored omaveloxolone, and improvement in PGIC correlated with the observed improvement in mFARS. Omaveloxolone was reported to be generally well-tolerated. Four (8%) omaveloxolone patients and two (4%) placebo patients discontinued trial drug due to an adverse event (AE). The reported AEs were generally mild to moderate in intensity, and the most common AEs (i.e., reported in > 10% of omaveloxolone-treated patients) observed more frequently (>5% difference) in omaveloxolone compared to placebo were headache, nausea, increased aminotransferases, fatigue, abdominal pain, diarrhea, oropharyngeal pain, muscle spasms, back pain, and decreased appetite. Increases in aminotransferases are a pharmacological effect of omaveloxolone. In preclinical studies, omaveloxolone has been shown to increase production of aminotransferases in vitro, which we believe are related to restoration of mitochondrial function. In MOXIe Part 2, the aminotransferase increases were associated with improvements (reductions) in total bilirubin and were not associated with any evidence of liver injury. In MOXIe Part 2, the overall rate of serious adverse events (SAEs) was low, with five patients in the omaveloxolone group and three patients in the placebo group reporting SAEs. No new safety signals were identified, and the reported SAEs were sporadic and generally expected in FA patients. In the patients who reported SAEs while receiving omaveloxolone, none led to discontinuation.
MOXIe Expansion Test
The open-label MOXIe Extension trial is ongoing, with a total of 149 patients enrolled (57 patients from MOXIe Part 1 and 92 patients from MOXIe Part 2). A total of 73 out of 75 (97%) patients without pes cavus who completed MOXIe Part 2 were enrolled in the MOXIe Extension, including 39 patients previously randomized to placebo (the placebo-to-omaveloxolone group) and 34 patients previously randomized to omaveloxolone (the omaveloxolone-to-omaveloxolone group). Due to the COVID-19 pandemic, not all patients had mFARS assessments performed at each time point. 19 --------------------------------------------------------------------------------
Deferred start scan results from
The intent of the post-hoc Delayed-Start Analysis is to evaluate whether omaveloxolone has a persistent effect on FA disease course. Conceptually, this analysis evaluates whether the treatment effect that was observed in the placebo-controlled MOXIe Part 2 trial is maintained in the MOXIe Extension trial when all patients are receiving omaveloxolone. If the treatment effect is maintained between those originally randomized to placebo (the placebo-to-omaveloxolone group) versus those originally randomized to omaveloxolone (the omaveloxolone-to-omaveloxolone group), then it demonstrates evidence of a persistent effect on the course of the disease. If the treatment effect is not maintained, and the patients originally randomized to placebo are able to achieve the same absolute response and "catch up" to the patients initially randomized to omaveloxolone, the results are consistent with a symptomatic treatment that does not affect the underlying course of the disease. Two timepoints were used in the analysis. The first timepoint was at Week 48, the final week of treatment in the placebo-controlled MOXIe Part 2 trial. The second timepoint was at Week 72 of the open-label MOXIe Extension in which all patients received omaveloxolone. A non-inferiority test was used to evaluate if the difference in mFARS between groups observed at the first timepoint was maintained or non-inferior at the second timepoint. The analysis methods, including the specified non-inferiority margin, were based on literature (Liu-Seifert, 2015a, 2015b). When comparing treatment groups using this methodology, maintaining a negative difference between treatment groups in mFARS is evidence of a persistent treatment effect. The Delayed-Start Analysis used in clinical modules in our initial NDA rolling submission for omaveloxolone was updated as of
August 2021. In this updated analysis 58 of 73 patients from MOXIe Part 2 without pes cavus who enrolled into MOXIe Extension had at least 72 weeks of exposure in MOXIe Extension, and 28 of these patients had at least 120 weeks of exposure in the Moxie Extension. Results of this analysis demonstrated that the between-group difference in mFARS observed at the end of the placebo-controlled MOXIe Part 2 period (least squares mean difference = -2.25 ± 1.07) was preserved at MOXIe Extension Week 72 in the delayed-start period (LS mean difference = -3.51 ± 1.45). Consistent with a persistent treatment effect on disease, the upper limit of the 90% CI for the difference estimate was less than zero (-0.615), meeting the threshold for demonstrating significant evidence of non-inferiority. Delayed-Start Analysis Primary Endpoint (Non-Inferiority Test)1 Placebo-Controlled
Week 48 (?1) Week
Ex. 72 (?2)
Difference (LS Mean ± SE) -2.25 ± 1.07
-3.51 ± 1.45
Estimate = ?2 - 0.5 × ?1 -2.39 ± 1.38 Upper Limit of 1-sided -0.615
90% CI for estimate
1Non-inferiority test performed using MMRM analysis with Toeplitz covariance
structure. 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 and beyond. 20 -------------------------------------------------------------------------------- Change from Baseline in mFARS (Patients without Pes Cavus) [[Image Removed: img70967532_2.jpg]] Many of the visits at Week 48 and Week 72 of the MOXIe Extension were scheduled during the initial peak of COVID-19 cases during Spring to Fall 2020. The mFARS assessment must be conducted in the clinic, and many in-clinic visits did not occur due to COVID-19 related travel restrictions and site closures during this period. Apart from the data at MOXIe Extension Week 48, parallel trajectories were seen in LS Mean mFARS change from baseline between the placebo-to-omaveloxolone group and the omaveloxolone-to-omaveloxolone group in MOXIe Extension. A longitudinal analysis was also performed to calculate annualized slopes incorporating all available data from the MOXIe Extension, which showed similar mean slopes in mFARS for the placebo-to-omaveloxolone group (0.45 ± 0.38 points per year) when compared to the omaveloxolone-to-omaveloxolone group (0.27 ± 0.59 points per year) with no significant difference between slopes (difference = -0.18 ± 0.67; p=0.79). In MOXIe Extension, omaveloxolone-treated patients have been progressing at a rate that is >75% less than the approximately two points per year that patients progressed in a recent large natural history study (Patel, 2016). Results from the Delayed-Start Analysis indicate a persistent omaveloxolone treatment effect on the disease course of FA. Patients who received omaveloxolone during the double-blind MOXIe Part 2 had a benefit that could not be achieved by patients initially randomized to placebo who began omaveloxolone one year later in MOXIe Extension. Notably, patients previously randomized to omaveloxolone in MOXIe Part 2 continued to show mean mFARS values that were similar to their original baseline after over three years of treatment.
No new safety signals were identified in the MOXIe Extension trial.
In the third quarter of 2021, we completed our pre-NDA meeting with the FDA. The purpose of the pre-NDA meeting was to discuss the content of Reata's planned NDA submission including the nonclinical data and CMC packages, data standard plan, and the overall content plan. In the meeting, we stated that we believed that the MOXIe data, along with the Delayed-Start Analysis, would provide sufficient clinical data to support a full approval. The FDA stated that the proposed primary and supportive efficacy data appear reasonable, though the Delayed-Start Analysis was viewed as exploratory. The FDA noted that the ability of the data to support full approval, and the adequacy of the data and the determination of which data may be supportive of efficacy, would be a matter of review. In response to our other questions about the contents of the NDA, the FDA exercised its discretion based on the seriousness of the indication and unmet medical need, subject to review, to permit us to submit the results of certain clinical pharmacology and nonclinical studies after approval. The additional studies include a thorough QT study with omaveloxolone, nonclinical metabolite toxicity studies, and six-month and two-year nonclinical carcinogenicity studies. The need for a drug-drug interaction study with a moderate CYP3A inducer will be established upon review of the adequacy of our submitted physiological based pharmacokinetic (PK) model. On
November 18, 2021, the FDA granted omaveloxolone Fast Track Designation for the treatment of FA, providing eligibility for FDA programs such as Priority Review and rolling submission of the NDA, if relevant criteria are met. The FDA granted our request for a rolling submission, and in March 2022, we completed submission of the NDA. This NDA is supported by the efficacy and safety data from the MOXIe Part 2 trial and additional supporting data from the MOXIe Part 1 and MOXIe Extension trials. We are continuing to complete the regulatory procedures and submissions required prior to filing a MAA in Europefor approval of omaveloxolone for the treatment of patients with FA. We have secured agreement on our Pediatric Investigation Plan with the Pediatric Committee, 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 studies, including 2- year carcinogenicity study data, may be submitted after approval. We plan to submit an MAA to the European Medicines Agencyfor omaveloxolone in the fourth quarter of 2022.
Omaveloxolone in other neurological indications
Omaveloxolone is a promising platform molecule. Since mitochondrial dysfunction is a key feature of many neurological and neuromuscular diseases, we believe that omaveloxolone may be broadly applicable to treat these 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 FA, ALS, familial and sporadic Parkinson's disease, and frontotemporal dementia. In clinical trials, improvements in neuromuscular function have been observed in FA patients 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. 22 -------------------------------------------------------------------------------- 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 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 first quarter of 2022, we initiated additional Phase 1 clinical pharmacology studies of RTA 901, including a drug-drug interaction study. Following completion of these Phase 1 studies, we plan to initiate a randomized, double-blind placebo-controlled Phase 2 trial of RTA 901 in diabetic patients with peripheral neuropathic pain in the fourth quarter of 2022. We are the exclusive licensee of RTA 901 and have worldwide commercial rights.
Chronic Kidney Disease Programs
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. We received a CRL from the FDA in February 2022with respect to its review of our NDA for bardoxolone in the treatment of patients with CKD caused by Alport syndrome. We will continue to work with the FDA to confirm our next steps on our Alport syndrome program. Kyowa Kirin is currently conducting its registrational AYAME trial of bardoxolone in diabetic (types 1 and 2) CKD in Japan.
Bardoxolone in patients with CKD caused by Alport syndrome
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 Foundationhas 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 November 9, 2020, we reported interim results from the long-term extension EAGLE trial. EAGLE is an international, multi-center, open-label, extended access trial evaluating the longer-term safety and tolerability of bardoxolone in patients with CKD caused by Alport syndrome who participated in the CARDINAL trial or patients with ADPKD who participated in the FALCON trial. The change from baseline in eGFR was assessed for the 14 patients with Alport syndrome who were treated with bardoxolone for three years (two years in CARDINAL and one year in EAGLE), with four-week off-treatment periods occurring at Weeks 48 and 100. Bardoxolone treatment resulted in a mean on-treatment increase from baseline in eGFR of 11.5 mL/min/1.73 m2 at Year 1, 13.3 mL/min/1.73 m2 at Year 2, and 11.0 mL/min/1.73 m2 at Year 3. 23 -------------------------------------------------------------------------------- In February 2022, we provided the FDA with an update on results from patients with CKD caused by Alport syndrome in the ongoing EAGLE trial. Mean increases in eGFR were observed at Week 12, Week 24, and Week 48 relative to Day 0 (before treatment) in EAGLE in patients who previously received placebo and initiated treatment with bardoxolone in EAGLE. Patients who previously received bardoxolone for two years in CARDINAL experienced similar mean increases in eGFR at all timepoints. For the 37 patients randomized to bardoxolone in CARDINAL who completed 48 weeks in EAGLE, bardoxolone treatment resulted in a mean on-treatment change from baseline in eGFR (relative to original CARDINAL baseline) of 9.2 mL/min/1.73 m2 at Year 1, 7.8 mL/min/1.73 m2 at Year 2, and 6.7 mL/min/1.73 m2 at Year 3. A subset of patients with Alport syndrome (n=18) completed 96 weeks of treatment in EAGLE, which amounts to approximately four years of total treatment, and had a mean ± standard error change in eGFR from CARDINAL baseline of 5.5 ± 3.5 mL/min/1.73 m2. This sustained improvement of kidney function is notable when compared to the CARDINAL trial population's expected yearly eGFR decline of 5.1 mL/min/1.73 m2, which was calculated based on five-year historical eGFR data collected before patients entered the trial. No new safety findings have been identified in the EAGLE trial. 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 has 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'sbriefing book and discussed at the Cardiovascular and Renal Drugs Advisory Committeemeeting 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. The FDA welcomed continued discussion on the details of a path forward. We plan to work closely with the FDA to achieve our goal of bringing this important medicine to patients in the United States. 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. We are in the process of preparing our responses. We requested a 90-day extension for our responses which was granted by the EMA. The timeline for the EMA's review cycle was therefore extended.
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. 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 Statesin 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 patients in a broad range of ages, with an eGFR between 30 and 90 mL/min/1.73 m2. 24 -------------------------------------------------------------------------------- In the first quarter of 2022, we finalized a protocol amendment to FALCON, and we initiated submission of the amendment to the FDA and other relevant health authorities. The major protocol amendment changes include an increase in the sample size from 550 to 850 patients, addition of adolescent (12 to 17 years) patients with ADPKD for a total age range of 12 to 70 years, removal of the off-treatment period (Week 48 - Week 52) during Year 1, change of 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). The protocol amendment also includes addition of an exploratory endpoint of eGFR change from baseline at Week 112 (12 weeks after planned drug discontinuation at Week 100), and addition of a sub study with ambulatory blood pressure monitoring. As agreed with the FDA prior to submission of the amendment, we recently had a Type A meeting to discuss key changes made to the FALCON protocol. Based on the discussion during the meeting and the meeting minutes, the Division stated that the proposed primary endpoint of eGFR change from baseline at Week 108 (8 weeks after planned drug discontinuation at Week 100) was reasonable since the available data suggest that bardoxolone's acute pharmacodynamic effect on eGFR should be largely resolved. The Division provided guidance on handling of data from patients who completed Year 2 of the study before the protocol amendment and so did not have an eGFR assessment at Week 108. This included direction on imputing missing data for these patients in the primary analysis. The Division stated that, in addition to the primary endpoint, it will be important to demonstrate that the treatment effect accrues over time to support a claim that bardoxolone slows the loss of kidney function in patients with ADPKD and provided guidance on the statistical methodologies for the exploratory eGFR slope analyses. The FDA also confirmed that if FALCON is positive, it could support registration of bardoxolone in ADPKD. Pursuant to the protocol amendment, patients will be treated with bardoxolone or placebo for 100 weeks followed by a twelve-week withdrawal period. The trial will remain blinded until study completion. 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 550 patients are currently enrolled in the trial.
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 2019and expects the last patient visit to occur in the second half of 2022.
With the NDA submission of omaveloxolone complete, we are advancing commercial launch preparations in
the United States. We are in the process of building the commercial infrastructure necessary to effectively support the commercialization of omaveloxolone for the treatment of FA, if and when we receive regulatory approval. Commercial launch preparation for omaveloxolone in FA will continue to advance in step with the regulatory progress. Our ability to launch omaveloxolone is dependent on the successful filing and defense of an NDA and approval by the FDA. We have hired commercial leadership and intend to build the teams, infrastructure, systems, and processes necessary for the launch of omaveloxolone. This will include sales, marketing, market access, patient support, and distribution. Additionally, we are expanding quality and compliance functions to support commercialization. A trade name for omaveloxolone has been selected. 25 -------------------------------------------------------------------------------- One challenge unique to rare-disease commercialization is patient identification due to the very small and sometimes heterogeneous disease populations. Our management team is experienced in maximizing patient identification for both clinical development and commercialization purposes in rare diseases. Commercial infrastructure for orphan products typically consists of a targeted, specialty sales force that calls on a limited and focused group of physicians and personnel involved in sales management, internal sales support, marketing, patient access, and distribution.
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 opportunities for our products in other global markets. Commercial launch preparation for omaveloxolone in FA outside of the United Stateswill advance in step with the regulatory progress.
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
March 31, 2022, we had $532.0 millionof cash and cash equivalents and an accumulated deficit of $1,329.5 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. 26 --------------------------------------------------------------------------------
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 only expect to recognize the deferred revenue through
Research and development costs
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
March 31, 2022, we have incurred a total of $1,129.7 millionin 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 candidate 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 costs include:
expenses incurred under agreements with clinical trial sites that conduct research and development on our behalf;
expenses incurred under contract research agreements and other agreements with third parties;
employee and consultant expenses, which include salaries, benefits, travel and stock-based compensation;
laboratory and supplier fees related to the performance of preclinical and non-clinical studies and clinical trials;
the cost of acquiring, developing, manufacturing and distributing clinical trial materials;
the cost of process development, scale-up and 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. 27 -------------------------------------------------------------------------------- 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 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
Japanand 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 Japanand we are reimbursing Kyowa Kirin for the costs of a certain number of patients in the study.
The following table summarizes our research and development expenses incurred during the three months ended
2022 2021 (in thousands) Bardoxolone
$ 6,462 $ 11,386Omaveloxolone 7,597 2,473 RTA 901 1,407 706
Other research and development expenses (1) 24,338 20,315 Total research and development expenses
(1) RTA 1701 expenses have been included in other research and development expenses due to development updates in the program.
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
SECrequirements, 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, 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. 28 --------------------------------------------------------------------------------
Benefit from (Provision for) Income Taxes
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.
Comparison of the three months ended
The following table sets forth our results of operations for the three months ended
March 31: 2022 2021 Change $ Change % (in thousands, except for percentage data) Collaboration revenue License and milestone $ 893 $ 795$ 98 12 Other revenue 21 149 (128 ) (86 ) Total collaboration revenue 914 944 (30 ) (3 )
Research and development 39,804 34,880 4,924 14 General and administrative 24,841 20,704 4,137 20 Depreciation 308 274 34 12 Total expenses 64,953 55,858 9,095 16 Other income (expense), net (9,772 ) (12,556 ) 2,784 22 Loss before taxes on income (73,811 ) (67,470 ) (6,341 ) (9 ) Benefit from (provision for) taxes on income (31 ) 15 (46 ) ** Net loss
$ (73,842 ) $ (67,455 ) $ (6,387 )(9 )
** Percentage not significant
License and milestone revenue represented approximately 98% and 84% of total revenue for the three months ended
March 31, 2022and 2021, respectively, and consisted of the recognition of Kyowa Kirin deferred revenue. License and milestone revenue increased by 12% during the three months ended March 31, 2022, compared to the three months ended March 31, 2021, primarily due to the achievement of a regulatory milestone in July 2021, variable consideration previously considered constrained, under the Kyowa Kirin Agreement.
Other income was not significant for the three months ended
The following table summarizes our expenses, including as a percentage of total expenses, for the three months ended
% of Total % of Total 2022 Expenses 2021 Expenses (in thousands, except for percentage data) Research and development
$ 39,80461 % $ 34,88062 % General and administrative 24,841 38 % 20,704 37 % Depreciation 308 1 % 274 1 % Total expenses $ 64,953 $ 55,85829
Research and development costs
Research and development expenses increased by
$4.9 million, or 14%, for the three months ended March 31, 2022, compared to the three months ended March 31, 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 three months ended March 31, 2022and 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
$4.1 million, or 20%, for the three months ended March 31, 2022, compared to the three months ended March 31, 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 three months ended March 31, 2022and 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 (expenses), net
Other income (expense), net decreased by
$2.8 millionfor the three months ended March 31, 2022, compared to the three months ended March 31, 2021. The decrease was primarily due to a decrease in effective interest rate in non-cash interest expense on liability related to the sale of future royalties. 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 current 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 during the quarter ended March 31, 2022.
Benefit from (Provision for) Income Taxes
The benefit of (Provision for) income taxes was not significant for the three months ended
Cash 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
March 31, 2022, we have raised gross cash proceeds of $476.6 millionthrough the sale of convertible preferred stock and $785.0 millionfrom payments under license and collaboration agreements. We also obtained $1,222.1 millionin 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 millionin 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 March 31, 2022, we had available cash and cash equivalents of approximately $532.0 million. Our cash and cash equivalents are invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.
The following table presents the main sources and uses of cash for each of the three months ended
2022 2021 (in thousands) Net cash (used in) provided by: Operating activities
$ (58,185 ) $ (45,011 )Investing activities (288 ) (193 ) Financing activities 194 4,678
Net change in cash and cash equivalents
Operating Activities Net cash used in operating activities was
$58.2 millionfor the three months ended March 31, 2022, consisting primarily of a net loss of $73.8 millionadjusted for non-cash items including stock-based compensation expense of $15.4 million, non-cash interest expense on liability related to sale of future royalty of $9.9 million, and a net decrease in operating assets and liabilities of $10.0 million. The significant items in the change in operating assets that impacted our use of cash in operations include a decrease of $4.5 millionin accounts payable due to timing of payments, and a decrease of $8.9 millionin direct research and other current and long-term liabilities, primarily due to annual bonus payments. Net cash used in operating activities was $45.0 millionfor the three months ended March 31, 2021, consisting primarily of a net loss of $67.5 millionadjusted for non-cash items including stock-based compensation expense of $14.7 million, non-cash interest expense on liability related to the sale of future royalties of $10.9 million, depreciation, amortization of issuance costs, imputed interest expense of $2.0 million, and a net increase in operating assets and liabilities of $5.1 million. The significant items in the change in operating assets that impacted our use of cash in operations include a decrease of $9.3 millionin accrued direct research and other current and long-term liabilities primarily due to the change in timing of bonus payments from December to March of the following year, which began with the December 2020payments being delayed to March 2021, and to the termination of PAH-related studies and the completion of CARDINAL and MOXIe clinical trials, offset by an increase in accounts payable of $3.6 milliondue to timing of payments.
Net cash used in investing activities was
Net cash provided by financing activities was
Working 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.
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 millionin 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 will begin 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 Japanfor bardoxolone for improvement of renal function in patients with Alport syndrome. We earned a $5.0 millionmilestone related to this event that was received and began to be recognized in the third quarter of 2021.
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 millionin exchange for future royalties on bardoxolone and an aggregate of 340,793 shares of our Class A common stock at $146.72per 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 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. 32 -------------------------------------------------------------------------------- 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. 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 we are pursuing;
the costs of our product candidate development efforts that are not reimbursed by our collaborators;
the costs necessary to obtain regulatory approvals, if any, for our product candidates in
continuing our existing collaboration with Kyowa Kirin and entering into new collaborations and receiving any collaboration payments;
the time and unreimbursed costs required to bring products to market in territories in which our product candidates are approved for sale;
revenue from any future sales of our products or for which we are entitled to profit sharing, royalties and milestones;
the level of reimbursement or third-party payment pricing available for our products;
the costs of obtaining third-party commercial supplies of our products, if any, manufactured in accordance with regulatory requirements;
the costs associated with any potential loss or corruption of our information or data during a cyberattack on our computer systems or those of our suppliers, vendors or associates who store or transmit our data;
the costs associated with being a public company;
any additional costs we incur or clinical trial delays we experience associated with the COVID-19 pandemic; and
the costs we incur in filing, prosecuting, maintaining and defending our portfolio of patents and other intellectual property rights.
If we are unable to expand our business or take advantage of our business opportunities because we lack 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 payment at certain specified times. The following table summarizes our contractual obligations and commitments as of
Payments due by period Less than 1 to 3 4 to 5 6 years and 1 year years years beyond Total (unaudited, in thousands)
Operating lease obligations(1)
$ 179,687 $ 237,599Total contractual obligations $ 12,633 $ 17,448 $ 27,831
(1) The table above assumes that a one-year rent reduction is applied from
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.
March 31, 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.
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
Recent accounting pronouncements
For a discussion of recent accounting pronouncements, see Note 2, Summary of Significant Accounting Policies, in the Notes to the Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.
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