Market Exclusive

Biotech Movers and Shakers: Reata Pharmaceuticals Inc (NASDAQ:RETA) and Five Prime Therapeutics Inc (NASDAQ:FPRX)


It’s Monday morning, and we’ve lined up a couple of companies in the biotech sector that moved considerably before the weekend close, and that look set to see further volatility during the early stages of this week. Here goes.

Reata Pharmaceuticals Inc (NASDAQ:RETA)

First up, a fresh name in the biotech space (at least from a publicly traded perspective), Reata. This company priced its IPO a couple of weeks ago, and debuted shortly after, in an offering that saw the company sell $5.5. million shares to pick up funds of $60.5 million. The offering came in at $11 – below its target range of $14-16. By the close of the week, however, Reata shares traded for just shy of $19; a gain of nearly 75% and a more than decent achievement against a backdrop of such uncertainty in wider markets. Nearly 25% of these gains came during the Friday session, as markets picked up on what looked to be a seeming overlook and sought to bring Reata’s valuation in line with expectations.

So, what is Reata, and what is all the excitement about? The company is a young biotech with programs across a spectrum of indicative ranges, primarily cardiovascular and ophthalmology. It plans to initiate phase III trials in pulmonary arterial hypertension (cardiovascular) and post surgical CEC loss (ophthalmology) this year, and these are the two indications and trials on which the majority of Reata’s post-IPO valuation is based. The cardiovascular trial is rooted in a drug called bardoxolone methyl – a sort of synthetic version of oleanolic acid that inhibits the NF-KB pathway. Similarly, the ophthalmology indication is set to kick off a phase III this year, this time with a drug called Omaveloxolone under investigation. CEC loss is a complication associated with cataract surgery – CEC here stands for corneal endothelial cells. Patients that have had surgery sometimes loss these cells as a byproduct of the surgical invasion, and early studies have suggested that Omaveloxolone can inhibit (or at least slow) this loss.

The funds raised in the IPO are what will be used to capitalize the two phase IIIs, as well as support the company’s wider (but less developed) pipeline. One to keep an eye on going forward.

Five Prime Therapeutics Inc (NASDAQ:FPRX)

Moving on, here’s Five Prime. Regular visitors to Market Exclusive will be more than familiar with Five Prime – we’ve covered the company a number of times in the past. For those that aren’t, however, it’s a protein-specialization development company with a focus (primarily) on oncology. The company opened on Friday at a little over $46.5 a share. By session close, it was down to $42 – a nearly 10% decline across the session. So why the drop? The decline comes on the back of some pretty disappointing data from one of its ongoing trials in mesothelioma, a cancer that involves tumors lining the cells of the lungs, stomach, heart and liver. The drug in question, FP-1039, is a growth factor inhibitor. The trial data looked ok, but that about sums it up. There was nothing special to come from the data released, and this is why markets are selling off on Five Prime. To sum up, around 40% of patients trialed o the active arm of the study demonstrated a response in line with predefined criteria. This is somewhat indicative of efficacy, but far from convincing of being viable for replication come a widening of the sample size. Additionally, adverse events were pretty common. More than 50% of patients reported grades 1-2 AE (this grade covers things like nausea, fatigue and appetite loss). Perhaps worse. In the dose limiting element of the study, some pretty serious AEs (Grade 5 bowel perforation/ischemia, Grade 3 elevated creatinine level and Grade 3 infusion reaction) came in to play.

It has to be said that in a cancer like mesothelioma the prognosis is never particularly good, and current SOC treatments have pretty severe associated side effects, so there is some level of leeway when it comes to new treatment tolerability. As such, there should be no issues if Five Prime wants to expand into a phase II for FP-1039 (something it will almost certainly do). When it does, however, all eyes will be on both the transferability of efficacy into a wider population and the tolerability – specifically, the grades of AEs that crop up during the study.

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