Reata’s stock nearly triples after FDA approves rare-disease drug amid uncertainty about approach to neuroscience treatments


The U.S. Food and Drug Administration on Tuesday approved Reata Pharmaceuticals Inc.’s treatment for Friedreich’s ataxia, a rare inherited disease that causes damage to the nervous system.

stock jumped more than 180% in after-hours trading, after being halted in advance of the FDA’s decision.

The drug, omaveloxolone, is now called Skyclarys and has been approved to treat adults 16 and older with the degenerative disease, which often appears when a patient is a teenager. Within 10 to 20 years, patients usually require a wheelchair, and death can occur in their 30s. An estimated 6,000 people in the U.S. have Friedreich’s ataxia, according to Reata’s securities filing, and there have been no approved treatments until now.

“This is a transformative milestone that highlights our commitment to developing and commercializing novel therapies for patients with severe diseases with few or no approved therapies,” Reata Chief Executive Warren Huff said in a news release.

The approval comes one day after the departure of Billy Dunn, the FDA’s head of neuroscience. The announcement, which was confirmed by the FDA, moved the stocks of several companies with neurology drugs under review at the FDA on Monday. It also caught the attention of Wall Street analysts, who largely view Dunn’s exit from the FDA as a loss for the industry.  

Reata’s stock fell about 30% to $30.85 on Monday, from $44.51 on Friday. Shares closed Tuesday’s regular session at $31.17, but shot above $88 in after-hours trading.

“The biggest question for us is how will potential regulatory flexibility change in the neuroscience sector with Dunn’s departure — particularly for neurodegenerative diseases (e.g., AD and Parkinson’s disease), rare diseases (e.g., ALS, Huntington’s disease, Friedreich’s ataxia) and difficult-to-treat neuropsychiatric disorders (e.g., negative symptoms, elderly agitation),” William Blair’s Myles Minter told investors. “We have long thought Dunn’s demonstrated flexibility was a bullish regulatory sign for risky neuroscience drug development.”

Other analysts expressed a similar sentiment. 

The “loss of a more permissive, industry-friendly voice is a long-term negative, though near-term there should be some degree of continuity, which limits the effects,” RBC Capital Markets analyst Brian Abrahams wrote in an investor note on Monday.

Dunn, a longtime FDA official, led the division when it approved Aduhelm, the controversial Alzheimer’s disease drug developed by Biogen
and Eisai
and approved in mid-2021. (The drug is now rarely used, and the companies in January received an accelerated approval of Leqembi, another Alzheimer’s therapy with better clinical data.) 

A congressional report released in December that assessed Aduhelm’s approval process said Dunn met with Alfred Sandrock, then the head of Biogen’s research and development, to discuss the failed clinical trials for Aduhelm. “Documents obtained from FDA show that following the meeting in Philadelphia, Biogen re-engaged in conversations with the agency,” the report stated. At least 45 meetings between Dunn and another Biogen executive took place, with the report describing the level of collaboration between the regulator and the drug company as “atypical.”

Reata has said it expects to make Skyclarys — its first approved therapy — available in the second quarter of this year. The company also said it received a rare pediatric disease priority review voucher.

Reata’s stock is down 18.4% over the past three months, while the S&P 500
has declined about 1%. 




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