U.S. officials will soon examine Reata Pharmaceuticals' request to treat a neurodegenerative condition, and RETA stock continued its two-day climb Friday.
This week, the biotech company finished submitting its application for omaveloxolone, a potential first treatment for Friedreich's ataxia. Patients with this disorder gradually lose muscle function. Next, the Food and Drug Administration will decide whether to accept Reata's application.
SVB Leerink analyst Joseph Schwartz says the situation is hard to read. Reata is requesting approval based on a single study. Further, the biotech company has suffered setbacks for a kidney disease drug after seeming bullish on its prospects, and RETA stock remains under pressure.
"We have little conviction in the future direction of omaveloxolone now, especially during a time when the FDA seems to be tougher to convince overall," he said in a report.
Still, on the stock market today, RETA stock popped 8.7% to 35.62. That builds onto a 6.1% jump on Thursday after the company said it finished submitting its application to the FDA.
RETA Stock: A First-Ever Treatment?
Reata hopes to be the first with an effective treatment for Friedreich's ataxia, an inherited condition in which patients experience progressive difficulty in walking. In a study called Moxie, patients showed statistically significant improvements in symptoms after 48 weeks of treatment.
Now, the FDA will decide whether to accept Reata's application. It could assign a standard review of six to 10 months. A priority review would be under six months. The agency could also request Reata run additional testing on omaveloxolone.
"We are very interested to learn whether the FDA designates the (application) as a priority or standard review, since this could provide some insight into how the agency is thinking about approvability," Leerink's Schwartz said. He has a market perform rating on RETA stock.
He noted Reata's recent struggles with bardoxolone, a rejected treatment for chronic kidney disease. In December, an FDA panel shot down bardoxolone, saying the evidence doesn't stand up in its favor. In February, the full agency officially rejected the drug. The news sent RETA stock into a tailspin.
The rejection "was not consistent with the company's characterization of its interactions with the agency up until that point," Schwartz said.
Amylyx Could Offer Some Insight
He also noted the FDA's difficulty with single-study approvals. Earlier this week, a mixed FDA panel voted down an amyotrophic lateral sclerosis treatment from Amylyx Pharmaceuticals. Known as ALS or Lou Gehrig's disease, the condition is also a neurodegenerative condition.
Amylyx showed its drug improves muscle function. But the test results on survival were murkier. Six of the 10-member committee voted that the evidence so far doesn't support the drug's benefit in ALS. The company is running a final-phase study now that could ultimately help clinch approval.
The same could happen to Reata, Schwartz said.
He sees only a 50% chance of success for Reata with omaveloxolone. If approved, he expects sales to peak at $1.2 billion.
RETA stock remains under pressure following the February bardoxolone rejection. That's reflected in the stock's Relative Strength Rating of 15. This puts shares in the bottom 15% of all stocks in terms of 12-month performance, according to IBD Digital.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
