This Top 3% Biotech Is In Limbo Amid An FDA Shakeup

The Food and Drug Administration will decide whether to approve a neurological disease drug from Reata Pharmaceuticals (RETA) this week, but RETA stock plummeted Monday.

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The RETA stock dive comes in lockstep with news that Bill Dunn, who directs the FDA’s Office of Neuroscience, will retire from the agency immediately. Dunn’s office is in charge of reviewing neurological drugs like Reata’s Friedreich’s ataxia treatment, omaveloxolone.

According to an internal email the FDA shared with Investor’s Business Daily, Dunn will “explore other opportunities while continuing his focus on improving the lives of patients with neurological diseases.” He will be succeeded by Teresa Buracchio. Buracchio has been the acting deputy director of the Office of Neuroscience since November.

It’s unclear what impact Dunn’s departure will have on upcoming drug reviews, including Reata’s, which is set for Tuesday. But on today’s stock market, RETA stock tumbled 30.7% to close at 30.85. Shares opened at 45.19 before Dunn’s retirement announcement.

RETA Stock: Approval In Question

Ahead of a recent FDA meeting to discuss Amylyx Pharmaceuticals‘ (AMLX) now approved amyotrophic lateral sclerosis drug, Relyvrio, Buracchio noted “it is of vital importance and it is legally required for FDA to ensure that drugs are both effective and safe,” SVB Securities analyst Joseph Schwartz said in a note to clients.

This “may indicate that she could hold omaveloxolone to a fairly high standard, if she is indeed responsible for Reata’s (review) decision tomorrow,” Schwartz said. “We view the timing of Dunn’s departure as curious; however, we also note given the proximity to the (review), the decision for omaveloxolone has likely already been made.”

He sees the decision as a coin flip and assigns a 50% chance omaveloxolone will gain approval and kept his market perform rating on RETA stock.

A Single Phase 3 Study

Reata shares have yo-yoed on omaveloxolone news. The company is requesting approval based on a single study. But most drug approvals require two successful final-phase, placebo-controlled studies.

Friedreich’s ataxia is an inherited condition in which patients experience progressive difficulty with walking. In the company’s test called Moxie, patients showed statistically significant improvements in symptoms after 48 weeks. RETA stock broke out of a consolidation in January, but shares have since fallen below their entry, according to MarketSmith.com.

Dunn, though, is well known for pushing along the approval of Biogen‘s (BIIB) controversial Alzheimer’s drug, Aduhelm, based on two Phase 3 studies — one successful and one failed. Further, his departure could cast a pall on Reata’s review.

RETA stock has a strong Relative Strength Rating of 97 out of a best-possible 99. This means shares rank in the top 3% of all stocks in terms of 12-month performance, according to IBD Digital.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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