Reviva Pharma's Novel Funding Approach In Schizophrenia

By Ben Comer, Chief Editor, Life Science Leader

Five years ago, it would have been hard to anticipate the current amount of development activity in schizophrenia, a complicated and devastating disease often treated with relatively inexpensive generic drugs. However, new scientific research and drug development efforts quietly begun more than a decade ago are now bearing fruit; several companies have entered the latest stages of development, with anticipated FDA approvals beginning in the second half of this year. Big Pharma’s checkbook is back out, after a long period of retreat from complicated mental health disorders.

Reviva Pharmaceuticals, founded by Laxminarayan Bhat, Ph.D. in 2006, is one such company now in Phase 3 development with an atypical antipsychotic small molecule treatment for schizophrenia, called brilaroxazine. Bhat believes that brilaroxazine, due to its “broad spectrum of activity,” will offer benefits over existing treatments, and has the potential to expand into additional indications including bipolar disorder, major depressive disorder, and ADHD.

After completing the global Phase 3 RECOVER-1 trial, with positive results, Reviva is now launching RECOVER-2, a registrational trial intended to support an NDA filing. Completion of that trial is expected in the second quarter of next year; Reviva plans to submit an NDA for brilaroxazine’s approval during Q3 of 2025 and anticipates a potential FDA approval in early 2026.

Bad Timing For CNS Deal-Making

Company building and clinical development, particularly in the CNS therapeutic area over the last 18 years, required innovation beyond product development. Reviva completed its Phase 2 study of brilaroxazine in 2013 and hoped that a Big Pharma partner would be persuaded to pick up the development tab to take the drug into Phase 3 and across the finish line, but it didn’t happen. “When we started the company, the economic model at the time — even for venture capital-funded companies — was to take a company’s candidate to Phase 2, establish proof-of-concept data, and then license it out,” says Bhat. “We thought maybe after the Phase 2 study of brilaroxazine, we’d license it to a Big Pharma.”

At the time of Reviva’s completion of the Phase 2 trial, however, Big Pharma’s therapeutic area focus had shifted. “Beginning in 2012, most [Big Pharma] companies started exiting their neuropsychiatric businesses,” says Bhat. “From 2012 to almost 2020, Big Pharma did not focus on schizophrenia … rather, it was an oncology focus, and there was a vacuum generated.”

The feedback Bhat received from potential Big Pharma suitors came in along the lines of, “You have great data, and if you can complete the Phase 3 study, we would be interested,” he says. For a private company with a DIY approach to attracting investors, that was a tall order. Bhat had already succeeded in financing the company through Phase 2 of development, using a unique approach (described below). But his investor base wasn’t able to fund a $50 million Phase 3 trial.

Early Funding Strategy

Before figuring out how to finance an expensive Phase 3 trial, Bhat had to build the company and get brilaroxazine into the clinic. When he started the company in 2006, he did so as a “pure technology and science guy … the business and entrepreneurial side, I had to learn.”

Bhat had deep experience with the “idea-to-product” translation process — he worked previously as a researcher at XenoPort (acquired by Arbor Pharmaceuticals in 2016), ARYx Therapeutics (shuttered in 2011 after an FDA delay led investors to jump ship), and the University of Kansas’s Higuchi Biosciences Center, and also won a Alexander von Humboldt fellowship in 1995 — and was confident about his ability to manage that fundamental aspect of the company. Bhat is also an inventor on over 100 granted patents. But he would need to learn the finance and business aspects of company leadership on the fly.

Funding is the immediate need in pharma company creation, and it differs significantly from technology and software company creation, notes Bhat. The latter is “less capital intensive and companies can expect to see revenue in two to three years.” In pharma, however, it takes 10 to 15 years, and typically requires either an acquisition or a public offering. Early-stage investors want strong past experience in a CEO, and senior leaders with an impressive track record.

For someone that doesn’t have a track record of creating and selling a company, it is challenging to find the investors needed to build a track record, says Bhat, a catch-22. “If someone sold a company for a couple hundred million dollars, that’s a track record people believe in, and they will write a big check. I didn’t have that background.” Bhat decided that he would need to generate data first, then use that data to convince investors about the opportunity. “I started the company with my entire savings at the time, a modest $150,000,” says Bhat. He set up the company in the San Jose BioCenter — a “great local facility that was affordable” — and got to work synthesizing molecules and using the lab space in the shared incubator.

Bhat got started with his own $150,000, and then was able to attract additional investors — “especially medical doctors, who understood this unmet need” — raising an initial $500,000 in seed funding (which included Bhat’s $150,000). From there, Bhat generated data, and subsequent investment, incrementally. Over several years, Bhat managed to raise $37 million from a pool of 200 individual investors, prior to taking the company public in 2020. Through that period of incremental execution, Bhat committed to meeting expectations, and early investors became advocates for the company, which helped bring in more investment. “Taking investor’s money, and having them believe in me, to the point of encouraging others to invest, was a very humbling experience,” says Bhat.

Creating A Pro-Investment Atmosphere

In some ways it’s easier to have a few large investors, versus 200 smaller investors, since company leaders have fewer expectations to manage. To generate goodwill among 200 different individuals required the creation of an “investment atmosphere,” says Bhat.

The process evolved over time, but one critical aspect, from the very beginning, was transparency. “I’ve been very transparent with my investors, communicating our progress and our needs, and keeping them updated,” says Bhat. “I arranged a shareholder meeting every year, and invited the investors and their spouses to attend, but I also wanted to create a unique experience.” Every company provides updates to shareholders, but Bhat came up with an annual meeting strategy and agenda customized for the type of investors he was attracting. “When you bring in retail investors, they may not be as sophisticated on the technology as a venture firm would be, or a fundamentals investor. I realized that we needed to educate them.”

The annual investor meeting began like many such meetings, with an explanation of what the company had accomplished over the past year, what the company would do in the next year, and what the budget looked like to accomplish those objectives. That session lasted half a day. The second half of the day, however, was reserved for an external speaker, typically a seasoned finance expert from a well-known financial institution, such as, for example, a managing director at Silicon Valley Bank, says Bhat.

After focusing on educating investors about Reviva specifically, during the first half of the day, the external speakers’ role was to educate investors about broader industry issues. “They didn’t talk about Reviva, they talked about trends in the industry,” says Bhat. “My job then was to tell them, here is the trend, and here is how we did and what you can expect.” Additionally, Bhat invited experts in drug development each year to talk about what is new in the industry, and what unmet needs exist. “Investors may hear the same things from me, but hearing it from an independent expert, with the ability to interact and ask questions … that created a lot of trust in the company and in my leadership, which helped to ultimately raise $37 million.”

Getting To Phase 3

Bhat’s initial financing model succeeded in getting brilaroxazine through Phase 2, but the cost of conducting a Phase 3 trial would require a lot more money: $50 million. A typical path for a company seeking funds for a Phase 3 trial is to raise them through a public offering; very few companies raise that kind of money through a private placement, unless there are very deep pockets backing it, says Bhat.

For Reviva, an IPO also presented challenges, since “over the last five to seven years, the trend has been insider participation at almost 50%,” says Bhat. “My 200 investors were not the kind that could write a check for $25 million.”

With no immediate licensing or co-development deals emerging after completion of the Phase 2 trial, Bhat had to find a way to raise the cash for Phase 3, without substantial insider support. That led Bhat to take Reviva public via a SPAC transaction in December of 2020, and become listed on the NASDAQ. Going public via SPAC “has its own limitations,” says Bhat, “but it’s a vehicle that allowed us to become a public company, and since then we have raised close to $100 million.”

Planning For Approval And Commercialization  

As Reviva commences its Phase 3 RECOVER-2 trial, Bhat is plotting out manufacturing scale up and commercial strategy. The company plans to add 10 additional employees by the end of this year, taking the internal headcount from 16 to 26. Beyond that headcount, Reviva also contracts with “senior-level professionals” that have previous Big Pharma experience, who help to lead various functions.

Reviva will continue to work with contract service providers for manufacturing and has no plans to build out its own manufacturing capability. “Outsourcing is more reliable, especially when we reach commercialization, because we need to have at least two different suppliers,” says Bhat. “Ideally, we would like to keep one in Asia, possibly in India, and another one in Eastern Europe.”

Due to trade agreements among the BRICS (Brazil, Russia, India, China, South America) countries, there are significant tax benefits in, for example, manufacturing in India and shipping to South America or Brazil. Reviva is currently working with a “top CDMO in the U.S.” on the development work up through NDA submission, but last year the company started working on a second supplier to establish longer term supplies, and to optimize price. “We need to be able to bring affordable drugs to patients,” says Bhat. “And we don’t want to rely on everything coming from one place,” a lesson Bhat watched other companies learn during COVID. “Strategically, we are working on having one supplier in India, one supplier in Europe, and then raw material for the drug substance should come from two different geographic locations, in case of any unforeseen problem with procuring material from a single country.”

Opportunity In Schizophrenia

Because the onset of schizophrenia often occurs earlier in life than many other chronic diseases — in a person’s 20s, most often — the safety profile of a drug that will need to be taken for life is even more important. While several drugs indicated for schizophrenia are available in low-cost generic form, they all have unwanted side effects, including metabolic and sexual side effects. Those side effects in schizophrenia patients often require additional medications to treat the side effects.

Bhat believes that a key attribute of brilaroxazine is the drug’s safety profile. “If you look at treatment compliance in our study, only 16% of patients dropped out, which is unheard of in schizophrenia,” he says. “Every single drug that has been approved for schizophrenia had drop out rates over 30%.” Brilaroxazine will be competitive with existing generic drugs, as well as new mechanisms, given the safety and efficacy profile demonstrated in the RECOVER-1 study, he says.

Asked whether he planned to conduct a head-to-head trial against KarXT, which has a PDUFA date this September, as a means for driving market share upon approval, Bhat said the juice isn’t worth the squeeze. “In the past, Lilly and BMS did a similar head-to-head comparison exercise with olanzapine and aripiprazole [in schizophrenia], with a large study, and they could not get a really conclusive outcome,” says Bhat. “Based on the historical experience of other big companies, I don’t think there is a clear benefit.”

“We have addressed the unmet need based on a proven mechanism, and the incremental improvement demonstrated by 10 to 13 drugs, to create a true best in class drug,” says Bhat. “We believe that [brilaroxazine] will be a more holistic treatment, addressing the overall outcome for patients.”