Stifel launched coverage of Reata Pharmaceuticals (NASDAQ:RETA) with a “buy” rating and $38 price target. The stock closed at $23.05 on Feb. 22.
“Our positive thesis centers on what we see as blockbuster potential for lead asset, bardoxolone methyl (BARD), in chronic kidney disease (CKD) caused by Alport syndrome,” writes analyst Dr. Adam Walsh.
“Yes, it’s true that investors previously abandoned BARD in CKD after the Phase 3 BEACON trial was halted in 2012 due to serious adverse events, but we and our KOL consultants believe the underlying causes behind the prior safety issues are now well characterized and understood and importantly, are prospectively controlled for in ongoing clinical trials and therefore unlikely to re-emerge,” he added.
Dr. Walsh said strong BARD efficacy across multiple prior CKD trials makes him confident that the drug will work as expected when initial Phase 2 data is announced in the second half this year.
“We are also sanguine on the BARD opportunity in connective tissue disease-associated pulmonary arterial hypertension, with Phase 3 data expected in the first half of 2018,” he added.
Reata also is conducting Phase 2 studies of omaveloxolone in two rare genetic disorders with no approved treatments: Friedreich’s ataxia and mitochondrial myopathies. “Given the early stage of development, neither indication is included in our model, but we see significant upside potential if data are positive,” Dr. Walsh said.
Over the next 12-to-18 months, he said four distinct clinical catalysts hold potential for significant value creation and “we recommend investors go long ahead of them.”
