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Why Reata Pharmaceuticals Is Rallying 17.5% Today

What happened

Reata Pharmaceuticals (NASDAQ: RETA) shares were surging 17.5% higher at 3 p.m. EST today, after the company reported that its experimental drug bardoxolone improved kidney function in patients with Alport syndrome.

So what

Alport syndrome is a rare genetic disease that increases the reabsorption of protein in the kidney, causing inflammation and fibrosis. There are about 12,000 people with Alport syndrome in the U.S., and almost all of these patients will develop end-stage renal disease. By age 25, roughly 50% of male patients with the most common form of Alport syndrome require dialysis or kidney transplant.

IMAGE SOURCE: GETTY IMAGES.

In the phase 2 portion of Reata Pharmaceuticals' phase 2/3 trial of bardoxolone, patients saw a significant improvement in kidney function, with over 80% of patients demonstrating a clinically meaningful improvement in estimated glomerular filtration rate (eGFR).

The company is now proceeding to the phase 3 portion of its study, which will enroll 150 patients and measure changes in eGFR after 48 weeks of treatment. It will also measure rates again at the 52-week mark, after patients have been off bardoxolone for four weeks.

Now what

Bardoxolone's phase 2 trial only enrolled 30 patients, making this a pretty small trial. In 2012, bardoxolone stumbled in a 2,000-patient study of chronic kidney disease when subjects taking it experienced a high rate of cardiac adverse events. At the time, the news was a big blow to collaboration partner AbbVie Inc. (NYSE: ABBV), which had spent hundreds of millions of dollars to get ex-U.S. rights to the drug back in 2010. When it nabbed those rights, AbbVie also invested $300 million in Reata Pharmaceuticals.

Currently, AbbVie isn't participating in developing bardoxolone for Alport syndrome patients (it's got plenty else going on), but it does have opt-in rights to this indication. While it sold 450,000 shares of Reata Pharmaceuticals in the first quarter, it still owned 1.2 million shares as of March 31.

Given the prior trial failure, perhaps the most important news today was that there were no serious adverse events in the phase 2 portion of this trial. Whether that continues in a larger phase 3 study is anyone's guess, but today's news is still encouraging for people with Alport syndrome, because currently, there are no treatments for it approved by the U.S. Food and Drug Administration.

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Todd Campbell has no position in any stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.