REATA PHARMACEUTICALS INC - Quarter Report: 2022 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-37785

Reata Pharmaceuticals, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware		11-3651945
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

5320 Legacy Drive Plano, Texas		75024
(Address of principal executive offices)		(Zip Code)

(972) 865-2219

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Class A Common Stock, Par Value $0.001 Per Share

RETA

NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, an emerging growth company, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 2, 2022, the registrant had 31,583,211 shares of Class A common stock, $0.001 par value per share, and 4,913,348 shares of Class B common stock, $0.001 par value per share, outstanding.

TABLE OF CONTENTS


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		Page
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		1
DEFINED TERMS		3
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	4
	Consolidated Balance Sheets	4
	Consolidated Statements of Operations	5
	Consolidated Statements of Stockholders’ Equity (Deficit)	6
	Consolidated Statements of Cash Flows	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	44
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	46
Signatures		47

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. In this Quarterly Report on Form 10-Q, all statements, other than statements of historical or present facts, including statements regarding our future financial condition, future revenues, projected costs, prospects, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “believe,” “will,” “may,” “might,” “estimate,” “continue,” “anticipate,” “intend,” “target,” “project,” “model,” “should,” “would,” “plan,” “expect,” “predict,” “could,” “seek,” “goals,” “potential,” and similar terms or expressions that concern our expectations, strategy, plans, or intentions. These forward-looking statements include, but are not limited to, statements about:

•

our expectations regarding the timing, costs, conduct, and outcome of our clinical trials, including statements regarding the timing of the initiation and availability of data from such trials;

•

the timing and likelihood of regulatory filings and approvals for our product candidates;

•

whether regulatory authorities determine that additional trials or data are necessary in order to accept a new drug application for review and/or approval;

•

our ability to obtain funding for our operations, including funding necessary to complete further development and commercialization of our product candidates;

•

our plans to research, develop, and commercialize our product candidates;

•

the manufacturing, supply, and commercialization of our product candidates, if approved;

•

the rate and degree of market acceptance of our product candidates;

•

our expectations regarding the potential market size and the size of the patient populations for our product candidates, if approved for commercial use, and the potential market opportunities for commercializing our product candidates;

•

the success of competing therapies that are or may become available;

•

our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates;

•

the ability to license additional intellectual property relating to our product candidates and to comply with our existing license agreements;

•

our ability to maintain and establish relationships with third parties, such as contract research organizations (CROs), contract manufacturing organizations, suppliers, and distributors;

•

our ability to maintain and establish collaborators with development, regulatory, and commercialization expertise;

•

our ability to attract and retain key scientific or management personnel;

•

our ability to grow our organization and increase the size of our facilities to meet our anticipated growth;

•

the accuracy of our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing;

•

our expectations related to the use of our available cash;

•

our ability to develop, acquire, and advance product candidates into, and successfully complete, clinical trials;

•

the initiation, timing, progress, and results of future preclinical studies and clinical trials, and our research and development programs;

•

the impact of governmental laws and regulations and regulatory developments in the United States and foreign countries;

•

developments and projections relating to our competitors and our industry; and

•

the impact of the coronavirus disease (COVID-19) on our clinical trials, our supply chain, and our operations; and

•

other risks and uncertainties, including those described under the heading “Risk Factors” included in our most recent Annual Report on Form 10-K for the year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission (SEC) on February 28, 2022.

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

DEFINED TERMS

Unless the context requires otherwise, references to “Reata,” “the Company,” “we,” “us,” or “our” in this Quarterly Report on Form 10-Q refer to Reata Pharmaceuticals, Inc. and its subsidiaries. We also have used several other terms in this Quarterly Report on Form 10-Q, most of which are explained or defined below.


Abbreviated Term		Defined Term
AbbVie		AbbVie Inc.
ADPKD		Autosomal dominant polycystic kidney disease
ADL		Activities of Daily Living
AE		Adverse event
ALS		Amyotrophic lateral sclerosis
ATP		Adenosine triphosphate
bardoxolone		Bardoxolone methyl
BXLS		Blackstone Life Sciences, LLC
CKD		Chronic kidney disease
CMC		Chemistry manufacturing controls
COVID-19		Coronavirus disease
CRL		Complete Response Letter
CRO		Contract research organization
DPNP		Diabetic peripheral neuropathic pain
eGFR		Estimated glomerular filtration rate
EMA		European Medicines Agency
ESKD		End stage kidney disease
Exchange Act		Securities Exchange Act of 1934
FA-COMS		Clinical Outcome Measures in Friedreich’s ataxia
FDA		United States Food and Drug Administration
FXN		Frataxin
GFR		Glomerular filtration rate
GGT		Gamma-glutamyl transferase
Kyowa Kirin		Kyowa Kirin Co., Ltd.
LTIP Plan		Second Amended and Restated Long Term Incentive Plan
MAA		Marketing Authorization Application
mFARS		Modified Friedreich’s Ataxia Rating Scale
MMRM		Mixed Model Repeated Measures
NDA		New Drug Application
PGIC		Patient global impression of change
PK		Pharmacokinetic
registrational trial		An adequate and well-controlled trial designed to be sufficient to apply for regulatory approval of a drug candidate, although notwithstanding the Company’s design a regulatory agency may determine that further clinical studies or data are required
RSU		Restricted Stock Unit
SAE		Serious adverse event
SEC		U.S. Securities and Exchange Commission
U.S. GAAP		Accounting principles generally accepted in the United States

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Reata Pharmaceuticals, Inc.

Consolidated Balance Sheets

(in thousands, except share data)


	June 30, 2022			December 31, 2021
	(unaudited)
Assets
Cash and cash equivalents	$	147,154		$	590,258
Marketable debt securities		334,317			—
Prepaid expenses and other current assets		9,739			6,217
Total current assets		491,210			596,475
Property and equipment, net		11,033			11,604
Operating lease right-of-use-assets		129,159			126,777
Other assets		147			160
Total assets	$	631,549		$	735,016
Liabilities and stockholders’ equity
Accounts payable	$	7,754		$	13,505
Accrued direct research liabilities		14,231			14,249
Other current liabilities		16,121			21,450
Operating lease liabilities, current		8,219			3,142
Deferred revenue		—			1,648
Total current liabilities		46,325			53,994
Other long-term liabilities		5			—
Operating lease liabilities, noncurrent		134,293			132,891
Liability related to sale of future royalties, net		382,290			362,142
Total noncurrent liabilities		516,588			495,033
Commitments and contingencies
Stockholders’ equity:
Common stock A, $0.001 par value: 500,000,000 shares authorized; issued and outstanding – 31,572,894 and 31,478,197 at June 30, 2022 and December 31, 2021, respectively		32			31
Common stock B, $0.001 par value: 150,000,000 shares authorized; issued and outstanding – 4,913,348 and 4,919,249 at June 30, 2022 and December 31, 2021, respectively		5			5
Additional paid-in capital		1,471,627			1,441,584
Accumulated deficit		(1,403,028	)		(1,255,631	)
Total stockholders’ equity		68,636			185,989
Total liabilities and stockholders’ equity	$	631,549		$	735,016

See accompanying notes.

Reata Pharmaceuticals, Inc.

Unaudited Consolidated Statements of Operations

(in thousands, except share and per share data)


	Three Months Ended						Six Months Ended
	June 30						June 30
	2022			2021			2022			2021
Collaboration revenue
License and milestone	$	754		$	803		$	1,648		$	1,598
Other revenue		8			1,418			29			1,568
Total collaboration revenue		762			2,221			1,677			3,166
Expenses
Research and development		39,331			40,066			79,136			74,946
General and administrative		25,143			21,998			49,984			42,703
Depreciation		273			287			581			561
Total expenses		64,747			62,351			129,701			118,210
Other income (expense), net		(9,571	)		(13,223	)		(19,343	)		(25,780	)
Loss before taxes on income		(73,556	)		(73,353	)		(147,367	)		(140,824	)
Benefit from (provision for) taxes on income		1			653			(30	)		669
Net loss	$	(73,555	)	$	(72,700	)	$	(147,397	)	$	(140,155	)
Net loss per share—basic and diluted	$	(2.02	)	$	(2.00	)	$	(4.04	)	$	(3.87	)
Weighted-average number of common shares used in net loss per share basic and diluted		36,467,802			36,299,735			36,440,364			36,251,948

See accompanying notes.

Reata Pharmaceuticals, Inc.

Unaudited Consolidated Statements of Stockholders’ Equity

(in thousands, except share and per share data)


	Three Months Ended June 30, 2022
	Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital		Deficit			Equity
Balance at March 31, 2022		31,525,514	$	31		4,919,249		$	5	$	1,457,222	$	(1,329,473	)	$	127,785
Net loss		—		—		—			—		—		(73,555	)		(73,555	)
Compensation expense related to stock options		—		—		—			—		13,864		—			13,864
Exercise of options		2,336		—		20,649			—		541		—			541
Issuance of common stock upon vesting of restricted stock units		16,963		1		1,531			—		—		—			1
Conversion of common stock Class B to Class A		28,081		—		(28,081	)		—		—		—			—
Balance at June 30, 2022		31,572,894	$	32		4,913,348		$	5	$	1,471,627	$	(1,403,028	)	$	68,636


	Six Months Ended June 30, 2022
	Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital		Deficit			Equity
Balance at December 31, 2021		31,478,197	$	31		4,919,249		$	5	$	1,441,584	$	(1,255,631	)	$	185,989
Net loss		—		—		—			—		—		(147,397	)		(147,397	)
Compensation expense related to stock options		—		—		—			—		29,308		—			29,308
Exercise of options		2,336		—		30,024			—		735		—			735
Issuance of common stock upon vesting of restricted stock units		52,070		1		4,366			—		—		—			1
Conversion of common stock Class B to Class A		40,291		—		(40,291	)		—		—		—			—
Balance at June 30, 2022		31,572,894	$	32		4,913,348		$	5	$	1,471,627	$	(1,403,028	)	$	68,636


	Three Months Ended June 30, 2021
	Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital		Deficit			Equity
Balance at March 31, 2021		31,360,256	$	31		4,909,554		$	5	$	1,394,997	$	(1,025,700	)	$	369,333
Net loss		—		—		—			—		—		(72,700	)		(72,700	)
Compensation expense related to stock options		—		—		—			—		13,244		—			13,244
Exercise of options		—		—		106,818			—		3,952		—			3,952
Issuance of common stock upon vesting of restricted stock units						2,180			—		—		—			—
Conversion of common stock Class B to Class A		94,073		—		(94,073	)		—		—		—			—
Balance at June 30, 2021		31,454,329	$	31		4,924,479		$	5	$	1,412,193	$	(1,098,400	)	$	313,829


	Six Months Ended June 30, 2021
	Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital		Deficit			Equity
Balance at December 31, 2020		31,109,154	$	31		5,044,931		$	5	$	1,375,640	$	(958,245	)	$	417,431
Net loss		—		—		—			—		—		(140,155	)		(140,155	)
Compensation expense related to stock options		—		—		—			—		27,923		—			27,923
Exercise of options		—		—		219,241			—		8,630		—			8,630
Conversion of common stock Class B to Class A		—		—		5,482			—		—		—			—
Issuance of Common Stock		345,175		—		(345,175	)				—					—
Balance at June 30, 2021		31,454,329	$	31		4,924,479		$	5	$	1,412,193	$	(1,098,400	)	$	313,829

See accompanying notes.

Reata Pharmaceuticals, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)


	Six Months Ended
	June 30
	2022			2021
Operating activities
Net loss	$	(147,397	)	$	(140,155	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		581			561
Amortization of debt issuance costs and imputed interest		—			3,487
Non-cash interest expense on liability related to sale of future royalty		20,148			22,354
Stock-based compensation expense		29,308			27,923
Amortization of discount (premium) on marketable debt securities		(347	)		—
Changes in operating assets and liabilities:
Income tax receivable and payable		—			22,228
Prepaid expenses, other current assets and other assets		(3,496	)		(4,995	)
Accounts payable		(5,756	)		3,550
Accrued direct research, other current and long-term liabilities		(5,133	)		(3,966	)
Operating lease obligations		6,433			—
Deferred revenue		(1,648	)		(1,598	)
Net cash used in operating activities		(107,307	)		(70,611	)
Investing activities
Purchases of property and equipment		(2,562	)		(462	)
Purchases of marketable securities		(333,970	)		—
Net cash used in investing activities		(336,532	)		(462	)
Financing activities
Exercise of options		735			8,630
Net cash provided by financing activities		735			8,630
Net decrease in cash and cash equivalents		(443,104	)		(62,443	)
Cash and cash equivalents at beginning of year		590,258			818,150
Cash and cash equivalents at end of period	$	147,154		$	755,707
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations	$	4,885		$	—
Purchases of equipment in accounts payable, accrued direct research, other current, and long-term liabilities	$	55		$	—
Acquisition of property and equipment through tenant improvement allowance	$	—		$	3,625

See accompanying notes.

Reata Pharmaceuticals, Inc.

Notes to Unaudited Consolidated Financial Statements

1. Description of Business

Reata Pharmaceuticals, Inc.’s (Reata, the Company, we, us, or our) mission is to identify, develop, and commercialize innovative therapies that change patients’ lives for the better. The Company focuses on small-molecule therapeutics with novel mechanisms of action for the treatment of severe, life-threatening diseases with few or no approved therapies. The Company’s lead programs are omaveloxolone in a rare neurological disease called Friedreich’s ataxia (FA) and bardoxolone methyl (bardoxolone) in rare forms of chronic kidney disease (CKD). Both of the Company’s lead product candidates activate the transcription factor Nrf2 to normalize mitochondrial function, restore redox balance, and resolve inflammation. Because mitochondrial dysfunction, oxidative stress, and inflammation are features of many diseases, the Company believes omaveloxolone, bardoxolone, and our next-generation Nrf2 activators have many potential clinical applications. Reata possesses exclusive, worldwide rights to develop, manufacture, and commercialize omaveloxolone, bardoxolone, and our next-generation Nrf2 activators, excluding certain Asian markets for bardoxolone in certain indications, which are licensed to Kyowa Kirin Co., Ltd. (Kyowa Kirin). In addition, we are developing RTA 901, the lead product candidate from our Hsp90 modulator program, in neurological indications. We are the exclusive licensee of RTA 901 and have worldwide commercial rights.

The Company’s consolidated financial statements include the accounts of all majority-owned subsidiaries. Accordingly, the Company’s share of net earnings and losses from these subsidiaries is included in the consolidated statements of operations. Intercompany profits, transactions, and balances have been eliminated in consolidation.

Prior period reclassifications

Certain prior period amounts in the consolidated financial statements have been reclassified to conform to the current period presentation. Specifically, Operating lease obligations have been reclassed out of Accrued direct research, other current and long-term liabilities in prior periods to conform with the current period presentation on the consolidated statements of cash flows.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The consolidated balance sheet at December 31, 2021, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the annual consolidated financial statements and footnotes thereto of the Company.

Summary of Significant Accounting Policies

The significant accounting policies used in the preparation of these condensed consolidated financial statements for the six months ended June 30, 2022 are consistent with those discussed in Note 2 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Investments in Marketable Securities and Cash Equivalents

The Company invests excess cash balances in marketable debt securities and classifies its investments as held-to-maturity on facts and circumstances present at the time the Company purchased the securities. At each balance sheet date presented, the Company classified all of its investments in debt securities as held-to maturity and as current assets as they represent the investment of funds available for current operations.

The Company’s marketable debt securities are classified as cash equivalents if the original maturity, from the date of purchase, is 90 days or less, and as marketable debt securities if the original maturity, from the date of purchase, is in excess of 90 days. The carrying amount of cash equivalents approximate fair value. As of June 30, 2022 and December 31, 2021, cash and cash equivalents comprise funds in cash, money market accounts, and treasury securities. For the marketable debt securities, the Company performs its own review of prices received from the independent pricing services by comparing these prices to other sources and for our marketable debt securities, the Company confirms those securities are trading in active markets.

The Company considers all available evidence to evaluate if an impairment loss exists, and if so, marks the investment to market through a charge to the Company’s consolidated statements of operations and comprehensive loss. The Company did not record any impairment charges related to our marketable debt securities during the six months ended June 30, 2022.

3. Collaboration Agreements

Subsequent to the 2019 reacquisition of certain rights originally licensed to AbbVie Inc. (AbbVie) (see “AbbVie,” below), the Company’s collaboration revenue and deferred revenue have been generated primarily from licensing fees and reimbursements for expenses received under our exclusive license with Kyowa Kirin (the Kyowa Kirin Agreement).

Kyowa Kirin

In December 2009, the Company entered into an exclusive license with Kyowa Kirin to develop and commercialize bardoxolone in the licensed territory. The terms of the agreement include payment to the Company of a nonrefundable, up-front license fee of $35.0 million and additional development and commercial milestone payments. As of June 30, 2022, the Company has received $50.0 million related to regulatory development milestone payments from Kyowa Kirin and has the potential in the future to achieve another $47.0 million from regulatory milestones and $140.0 million from commercial milestones. The Company also has the potential to achieve tiered royalties ranging from the low teens to the low 20 percent range, depending on the country of sale and the amount of annual net sales, on net sales by Kyowa Kirin in the licensed territory. The Company is participating on a joint steering committee with Kyowa Kirin to oversee the development and commercialization activities related to bardoxolone. Any future milestones and royalties received are subject to mid to lower single digit percent declining tiered commissions to certain consultants as compensation for negotiations of the Kyowa Kirin Agreement.

The up-front payment and regulatory milestones are accounted for as a single unit of accounting. The Company regularly evaluates its remaining performance obligation under the Kyowa Kirin Agreement. Accordingly, revenue may fluctuate from period to period due to changes to its estimated performance obligation period and variable considerations. The Company began recognizing revenue related to the up-front payment upon execution of the Kyowa Kirin Agreement.

In March 2021, the Company’s performance obligation period under the Kyowa Kirin Agreement was extended to June 2022, which decreased quarterly revenue recognition by approximately $0.4 million prospectively.

On July 27, 2021, Kyowa Kirin submitted a New Drug Application (NDA) in Japan to the Ministry of Health, Labour and Welfare for bardoxolone for improvement of renal function in patients with Alport syndrome. Based on this submission, the Company earned a $5.0 million milestone payment, variable consideration previously considered constrained, under the Kyowa Kirin Agreement. As a result, the Company recorded $4.7 million in collaboration revenue, a cumulative catch-up for the portion of this milestone that was satisfied in prior periods, and $0.3 million in deferred revenue that will be recognized over the remaining performance obligation period. Under the Kyowa Kirin Agreement, we will not recognize any deferred revenue subsequent to June 30, 2022.

AbbVie

In September 2010, the Company entered into a license agreement with AbbVie (the AbbVie License Agreement) for an exclusive license to develop and commercialize bardoxolone in the Licensee Territory (as defined in the AbbVie License Agreement).

In December 2011, the Company entered into a collaboration agreement with AbbVie (the Collaboration Agreement) to jointly research, develop, and commercialize the Company’s portfolio of second and later generation oral Nrf2 activators.

In October 2019, the Company and AbbVie entered into an Amended and Restated License Agreement (the Reacquisition Agreement) pursuant to which the Company reacquired the development, manufacturing, and commercialization rights concerning its proprietary Nrf2 activator product platform originally licensed to AbbVie in the AbbVie License Agreement and the Collaboration Agreement. In exchange for such rights, the Company agreed to pay AbbVie $330.0 million, all of which has subsequently been paid. Additionally, the Company will pay AbbVie an escalating, low single-digit royalty on worldwide net sales, on a product-by-product basis, of omaveloxolone and certain next-generation Nrf2 activators. The execution of the Reacquisition Agreement ended our performance obligations under the Collaboration Agreement.

The Company recognized interest expense related to the Reacquisition Agreement of approximately $1.7 million, during the six months ended June 30, 2021. As of June 30, 2022, the Company has fully satisfied its payable to AbbVie, therefore no interest expense was recognized for the three and six months ended June 30, 2022.

4. Liability Related to Sale of Future Royalties

On June 24, 2020, the Company closed on the Development and Commercialization Funding Agreement with an affiliate of Blackstone Life Sciences, LLC (BXLS), which provides funding for the development and commercialization of bardoxolone for the treatment of CKD caused by Alport syndrome, autosomal dominant polycystic kidney disease (ADPKD), and certain other rare CKD indications in return for future royalties (the Development Agreement). The Development Agreement includes a $300.0 million payment by an affiliate of BXLS in return for various percentage royalty payments on worldwide net sales of bardoxolone, once approved in the United States or certain specified European countries, by Reata and its licensees, other than Kyowa Kirin. The royalty percentage will initially be in the mid-single digits and, in future years, can vary between higher-mid single digit percentages to low-single digit percentages depending on various milestones, including indication approval dates, cumulative royalty payments, and cumulative net sales. Pursuant to the Development Agreement, we have granted BXLS a security interest in substantially all of our assets. After a bardoxolone product approval has been obtained by the Company, the Company is obligated to make certain minimum cumulative payment amounts in 2025 through 2033, but only until BXLS has achieved a certain internal rate of return targets.

In addition, concurrent with the Development Agreement, the Company entered into a common stock purchase agreement (the Purchase Agreement) with affiliates of BXLS to sell an aggregate of 340,793 shares of the Company’s Class A common stock at $146.72 per share for a total of $50.0 million.

The Company concluded that there were two units of accounting for the consideration received, comprised of the liability related to the sale of future royalties and the common shares. The Company allocated the $300.0 million from the Development Agreement and $50.0 million from the Purchase Agreement between the two units of accounting on a relative fair value basis at the time of the transaction. The Company allocated $294.5 million, which includes $0.8 million in transaction costs incurred, in transaction consideration to the liability, and $55.5 million to the common shares. The Company determined the fair value of the common shares based on the closing stock price on the June 24, 2020, the closing date of the Development Agreement. The effective interest rate under the Development Agreement, including transaction costs, is approximately 13.8%. During the prior quarter, the Company reassessed the expected royalty payments and lowered our previous estimate of future sales for which royalties will be paid. Accordingly, we have prospectively adjusted and recognized lower non-cash interest expense using a 10.9% effective interest rate, as of June 30, 2022.

The following table shows the activity within the liability related to sale of future royalties for the six months ended June 30, 2022:


	Liability Related to Sale of Future Royalties
	(in thousands)
Balance at December 31, 2021	$	362,928
Non-cash interest expense recognized		20,115
Balance at June 30, 2022		383,043
Less: Unamortized transaction cost		(753	)
Carrying value at June 30, 2022	$	382,290

5. Marketable Debt Securities

During the quarter ended June 30, 2022, the Company invested its excess cash balances in marketable debt securities and, at each balance sheet date presented, the Company classified all of its investments in debt securities as held to maturity and as current assets as they mature within 12 months and represent the investment of funds available for current operations.

The following tables summarize our marketable debt securities (in thousands), as of June 30, 2022:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value (1)
Marketable debt securities:
U.S. treasury securities		334,317	—			(542	)		333,775
Total	$	334,317	$	-	$	(542	)	$	333,775

(1) The fair value was determined using the three-tier fair value hierarchy for disclosure in accordance with Accounting Standards Codification 820-10. The Company's investments in marketable securities are classified within Level 2 of the fair value hierarchy. The Company uses quoted prices for similar assets sourced from certain third-party pricing services. The third-party pricing services generally utilize industry standard valuation models for which all significant inputs are observable, either directly or indirectly, to estimate the price or fair value of the securities. The primary input generally includes reported trades of or quotes on the same or similar securities. The Company does not make additional judgments or assumptions made to the pricing data sourced from the third-party pricing services.

6. Other Income (Expense), Net


	Three Months Ended						Six Months Ended
	June 30						June 30
	2022			2021			2022			2021
	(in thousands)
Other income (expense), net
Investment income	$	786		$	13		$	918		$	93
Interest expense		—			(1,773	)		—			(3,487	)
Non-cash interest expense on liability related to sale of future royalty		(10,277	)		(11,429	)		(20,148	)		(22,354	)
Other income (expense)		(80	)		(34	)		(113	)		(32	)
Total other income (expense), net	$	(9,571	)	$	(13,223	)	$	(19,343	)	$	(25,780	)

Investment Income

Interest income consists primarily of interest generated from our cash and cash equivalents and marketable debt securities.

Interest Expense

Interest expense consists primarily of the imputed interest from the amount due to AbbVie under the Reacquisition Agreement.

Non-Cash Interest Expense on Liability Related to Sale of Future Royalties

Non-cash interest expense consists of recognition of interest expense based on the Company’s current estimate of future royalties expensed to be paid over the estimated term of the Development Agreement.

Other Income (Expense)

Other income (expense) consists primarily of gains and losses on foreign currency exchange.

7. Leases

The Company headquarters is located in Plano, Texas, where it leases approximately 122,000 square feet of office space. The Company leases additional space located in Irving, Texas, where it leases approximately 34,890 square feet of office and laboratory space.

On February 4, 2022, the Company extended the lease for the office and laboratory space in Irving, Texas, to October 31, 2024, with an option to extend for a fixed 12-month period.

On March 8, 2022, the Company extended the lease for the Plano office to December 31, 2023.

The Company has an additional lease of a single-tenant, build-to-suit building of approximately 327,400 square feet of office and laboratory space located in Plano, Texas with an initial lease term of 16 years. The Company entered into the lease agreement on October 15, 2019 (the 2019 Lease Agreement), and at the Company’s option, it may renew the lease for two consecutive five-year renewal periods or one ten-year renewal period. On December 15, 2021, the Company obtained control of the space, and, accordingly, the Company recorded related right-of-use assets and the lease liabilities during the fourth quarter of 2021. The Company recorded the liability associated with the 2019 Lease Agreement at the present value of the lease payments not yet paid, using the discount rate as of the commencement date. As the discount rate implicit in the 2019 Lease Agreement was not readily determinable, the Company utilized its incremental borrowing rate. The renewals are not assumed in the determination of the lease term, since they are not deemed to be reasonably assured at the inception of the lease. At inception, the Company recorded $124.5 million as a right-of-use asset, which represented a lease liability of $133.2 million, net of $8.7 million of lease incentives recognized.

For the six months ended June 30, 2022, the Company paid $2.1 million for amounts included in the measurement of lease liabilities. During the three and six months ended June 30, 2022, the Company recorded total rent expense of $4.3 million and $8.6 million, respectively. During the three and six months ended June 30, 2021, the Company recorded operating lease expense of $0.8 million and $1.6 million, respectively.

Supplemental balance sheet and other information related to the Company’s operating leases is as follows:


	As of June 30,
	2022			2021
Weighted-average remaining lease term (in years)		15.6			1.3
Weighted-average discount rate		6.5	%		8.1	%

Maturities of lease liabilities by fiscal year for the Company’s operating leases:


	As of June 30, 2022
	(in thousands)
2022 (remaining six months)	$	8,395
2023 (1)		10,638
2024		7,427
2025		13,737
Thereafter		196,049
Total lease payments (1)		236,246
Less: Imputed interest		(93,734	)
Present value of lease liabilities	$	142,512

(1) Above table assumes one year rent abatement is applied beginning in June 2023 following United States Food and Drug Administration (FDA) approval of omaveloxolone.

8. Income Taxes

The following table summarizes income tax benefit expense and effective income tax rate:


	Three Months Ended						Six Months Ended
	June 30						June 30
	2022			2021			2022			2021
	(in thousands, except for percentage data)
Benefit from (provision for) taxes on income	$	1		$	653		$	(30	)	$	669
Effective income tax rate		0.0	%		0.9	%		0.0	%		0.5	%

The Company’s effective tax rate for the three months and six months ended June 30, 2022, varies with the statutory rate primarily due to changes in the valuation allowance related to certain deferred tax assets generated or utilized in the applicable period.

Deferred tax assets are regularly reviewed for recoverability by jurisdiction and valuation allowances are established based on historical and projected future taxable losses and the expected timing of the reversals of existing temporary differences. The Company has recorded valuation allowances against the majority of its deferred tax assets as of June 30, 2022, and the Company expects to maintain these valuation allowances until there is sufficient evidence that future earnings can be achieved, which is uncertain at this time.

9. Stock-Based Compensation

The following table summarizes time-based and performance-based stock compensation expense reflected in the consolidated statements of operations:


	Three Months Ended				Six Months Ended
	June 30				June 30
	2022		2021		2022		2021
	(in thousands)
Research and development	$	6,344	$	5,263	$	13,951	$	12,071
General and administrative		7,520		7,981		15,357		15,852
Total stock compensation expense	$	13,864	$	13,244	$	29,308	$	27,923

Restricted Stock Units (RSUs)

The following table summarizes RSU activity as of June 30, 2022, under the Second Amended and Restated Long Term Incentive Plan (LTIP Plan):


	Number of RSUs			Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2022		809,145		$	66.91
Granted		624,479			27.75
Vested		(56,436	)		95.89
Forfeited		(173,904	)		58.30
Outstanding at June 30, 2022		1,203,284		$	46.52

As of June 30, 2022, total unrecognized compensation expense related to RSU and performance-based RSU awards that were deemed probable of vesting was approximately $36.6 million, which excludes 148,500 shares of unvested performance-based RSUs that were deemed not probable of vesting totaling unrecognized stock-based compensation expense of $13.7 million.

Stock Options

The following table summarizes stock option activity as of June 30, 2022, under the LTIP Plan and standalone option agreements:


	Number of Options			Weighted- Average Price
Outstanding at January 1, 2022		4,743,180		$	86.06
Granted		1,419,422			28.23
Exercised		(32,360	)		22.73
Forfeited		(352,086	)		101.49
Expired		(85,061	)		142.08
Outstanding at June 30, 2022		5,693,095		$	70.21
Exercisable at June 30, 2022		3,134,238		$	59.54

As of June 30, 2022, total unrecognized compensation expense related to stock options was approximately $76.3 million, which excludes 553,200 shares of unvested performance-based stock options that were deemed not probable of vesting totaling unrecognized stock-based compensation expense of $47.6 million.

The total intrinsic value of all outstanding options and exercisable options as of June 30, 2022 was $18.3 million and $15.1 million, respectively.

The number of weighted average options that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive represented 6,896,379 and 4,685,620 shares as of June 30, 2022 and 2021, respectively.

10. Employee Benefit Plans

In 2010, we adopted an Employee Investment Plan, qualified under Section 401(k) of the Internal Revenue Code, which is a retirement savings plan covering substantially all of our U.S. employees (the Plan). The Plan is administered under the “safe harbor” provision of ERISA. Under the Plan, an eligible employee may elect to contribute a percentage of their salary on a pre-tax basis, subject to federal statutory limitations. Beginning in January 2019, the Company implemented a discretionary employer matching contribution of $1.00 for every $1.00 contributed by a participating employee up to $7,000 and $6,000 annually in 2022 and 2021, respectively, which such matching contributions become fully vested after four years of service. The Company recorded expense of $0.3 million and $0.4 million for the three months ended June 30, 2022 and 2021, respectively, and $1.6 million and $1.2 million for the six months ended June 30, 2022 and 2021, respectively, which includes the Company’s contributions and administrative costs.

11. Commitments and Contingencies

Litigation

From time to time, the Company is a party to legal proceedings in the course of its business, including the matters described below. The outcome of any such legal proceedings, regardless of the merits, is inherently uncertain. In addition, litigation and related matters are costly and may divert the attention of our management and other resources that would otherwise be engaged in other activities. If the Company were unable to prevail in any such legal proceedings, its business, results of operations, liquidity and financial condition could be adversely affected. The Company recognizes accruals for litigations to the extent that it can conclude that a loss is both probable and reasonably estimable and recognizes legal expenses as incurred.

Bardoxolone Securities Litigation

In late 2021 and early 2022, certain putative stockholders of the Company filed complaints in the United States District Court for the Eastern District of Texas alleging violations of the federal securities laws against the Company and certain of its executives, including its Chief Executive Officer; its Chief Operating Officer, Chief Financial Officer, and President; and its Chief Innovation Officer (in one of the suits). On April 22, 2022, the suits were consolidated and a lead plaintiff was appointed. On June 21, 2022, the lead plaintiff filed a complaint against the Company, the aforementioned executives, certain current and former member of the Company’s Board of Directors, and underwriters in connection with secondary offerings of Company stock in 2019 and 2020. The complaint alleges, among other things, that the Company made false and misleading statements regarding the sufficiency of the Phase 2 and Phase 3 CARDINAL studies to support an NDA for bardoxolone in the treatment of CKD caused by Alport syndrome, and the Company’s interactions with the FDA concerning potential approval for bardoxolone. The complaint asserts claims under the Securities Act of 1933 and the Securities Exchange Act of 1934 (Exchange Act). The plaintiffs seek, among other things, a class action designation, an award of damages, and costs and expenses, including attorney fees and expert fees. The Company believes that the allegations contained in the complaint are without merit and intends to defend the case. The Company cannot predict at this point the length of time that this action will be ongoing or the liability, if any, which may arise therefrom.

Derivative Lawsuit

An alleged stockholder of the Company filed a derivative action in the Court of Chancery of the State of Delaware against certain current and former directors of the Company and naming the Company as a nominal defendant. The plaintiff asserts claims in the complaint of breach of fiduciary duty and unjust enrichment concerning the alleged payment of excessive compensation to the non-employee directors of the Company between fiscal years 2019 and 2021. The plaintiff seeks, among other things, an order awarding damages and costs and expenses, including attorneys and expert fees, and directing the Board of Directors to reform and improve its corporate governance and internal procedures relating to the award of non-employee director compensation.

The defendants believe that the allegations contained in the complaint are without merit and intend to defend the case. The Company cannot predict at this point the length of time that this action will be ongoing or the liability, if any, which may arise therefrom.

Indemnifications

Accounting Standards Codification 460, Guarantees, requires that, upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligations it assumes under that guarantee.

As permitted under Delaware law and in accordance with the Company’s bylaws, officers and directors are indemnified for certain events or occurrences, subject to certain limits, while the officer or director is or was serving in such capacity. The maximum amount of potential future indemnification is unlimited; however, the Company has obtained director and officer insurance that limits its exposure and may enable recoverability of a portion of any future amounts paid. The Company believes the fair value for these indemnification obligations is minimal. Accordingly, the Company has not recognized any liabilities relating to these obligations as of June 30, 2022.

The Company has certain agreements with licensors, licensees, collaborators, and vendors that contain indemnification provisions. In such provisions, the Company typically agrees to indemnify the licensor, licensee, collaborator, or vendor against certain types of third-party claims. The Company accrues for known indemnification issues when a loss is probable and can be reasonably estimated. There were no accruals for expenses related to indemnification issues for any period presented.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes and other financial information appearing in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, operations, and product candidates, includes forward-looking statements that involve risks and uncertainties. Factors that may cause actual results to differ materially from current expectations include, among other things, those described under the headings “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” and discussed elsewhere in this Quarterly Report on Form 10-Q.

Overview

We are a clinical-stage biopharmaceutical company focused on identifying, developing, and commercializing innovative therapies that change patients’ lives for the better. We concentrate on small-molecule therapeutics with novel mechanisms of action for the treatment of severe, life-threatening diseases with few or no approved therapies. Our lead programs are omaveloxolone in Friedreich’s ataxia and bardoxolone in rare forms of CKD. Both of our lead product candidates activate the transcription factor Nrf2 to normalize mitochondrial function, restore redox balance, and resolve inflammation. Because mitochondrial dysfunction, oxidative stress, and inflammation are features of many diseases, we believe omaveloxolone, bardoxolone, and our next-generation Nrf2 activators have many potential clinical applications. We possess exclusive, worldwide rights to develop, manufacture, and commercialize omaveloxolone, bardoxolone, and our next-generation Nrf2 activators, excluding certain Asian markets for bardoxolone in certain indications, which are licensed to Kyowa Kirin. In addition, we are developing RTA 901, the lead product candidate from our Hsp90 modulator program, in neurological indications. We are the exclusive licensee of RTA 901 and have worldwide commercial rights.

Recent Key Developments

Omaveloxolone for Friedreich’s Ataxia

The U.S. Food and Drug Administration (FDA) has granted Fast Track Designation, Orphan Drug Designation, and Rare Pediatric Disease Designation to omaveloxolone for the treatment of Friedreich’s ataxia. In March 2022, we completed rolling submission of an NDA to the FDA for omaveloxolone for the treatment of patients with Friedreich’s ataxia. In May 2022, the FDA accepted our NDA for filing and granted Priority Review. We recently completed a mid-cycle communication meeting with the FDA and submitted additional data and analyses to the FDA. See “Programs in Neurological Diseases – Omaveloxolone in Patients with Friedreich’s Ataxia – Regulatory Guidance and Regulatory Interactions in the U.S.” below.

The FDA advised us that it is planning to hold an advisory committee meeting to discuss the application. The Prescription Drug User Fee Act (PDUFA) date, the FDA action date for the application, is scheduled for November 30, 2022.

We are continuing to complete the regulatory procedures and submissions required prior to filing a Marketing Authorization Application (MAA) in Europe for approval of omaveloxolone for the treatment of patients with Friedreich’s ataxia. We have received a positive opinion from the Pediatric Committee on our Pediatric Investigation Plan with a commitment to seek scientific advice for additional input on the protocol design, and we also received European Medicines Agency (EMA) Follow-Up Protocol Assistance feedback regarding our nonclinical and chemistry manufacturing controls (CMC) programs. The EMA feedback indicated that there were no identified impediments to our planned MAA submission and included agreement that certain nonclinical studies, including 2-year carcinogenicity study data, may be submitted after approval. We plan to submit an MAA to the EMA for omaveloxolone in the fourth quarter of 2022.

RTA 901 for Neurological Indications, Including Diabetic Peripheral Neuropathic Pain

In the first quarter of 2022, we initiated additional Phase 1 clinical pharmacology studies of RTA 901, including a drug-drug interaction study which has been fully enrolled. Following completion of these Phase 1 studies, we plan to initiate a randomized, double-blind placebo-controlled Phase 2 trial of RTA 901 in diabetic patients with peripheral neuropathic pain in the fourth quarter of 2022.

Bardoxolone in Patients with CKD Caused by Alport Syndrome

We received a Complete Response Letter (CRL) from the FDA in February 2022 with respect to its review of our NDA for bardoxolone in the treatment of patients with CKD caused by Alport syndrome. The CRL indicated the FDA cannot approve the NDA in its present form. We have recently requested a Type C meeting to discuss the program and continue to work with the FDA to confirm our next steps on our Alport syndrome program.

In October 2021, we submitted an MAA to the EMA for bardoxolone in the treatment of patients with CKD caused by Alport syndrome. In the first quarter of 2022, we received the 120-day list of questions from the EMA. We are in the process of preparing our responses. We previously requested a 90-day extension for our responses which was granted by the EMA. We plan to submit additional long term extension data from the ongoing EAGLE trial to address the comments and questions raised by the EMA and have been granted a further 30-day extension to complete our responses.

Bardoxolone in Patients with Autosomal Dominant Polycystic Kidney Disease (ADPKD)

We are currently enrolling patients in FALCON, a Phase 3, international, multi-center, randomized, double-blind, placebo-controlled trial studying the safety and efficacy of bardoxolone in patients with ADPKD, randomized one-to-one to active drug or placebo. FALCON is enrolling 850 patients in a broad range of ages with an estimated glomerular filtration rate (eGFR) between 30 and 90 mL/min/1.73 m2. The primary endpoint is eGFR change from baseline at Week 108 (8 weeks after planned drug discontinuation at Week 100). More than 580 patients are currently enrolled in the trial.

Background: Our Programs

The following chart outlines each of our programs by indication and phase of development:

1NDA accepted for filing in May 2022, granted Priority Review, and assigned a PDUFA date of November 30, 2022.

2DPNP: Diabetic peripheral neuropathic pain.

3On February 25, 2022, we received a CRL from the FDA. We have recently requested a Type C meeting to discuss the program and continue to work with the FDA to confirm our next steps on our Alport syndrome program. MAA in the European Union is under review.

4AYAME trial conducted in Japan by our strategic collaborator in CKD, Kyowa Kirin. Kyowa Kirin expects the last patient visit to occur in the second half of 2022.

5Based on the outcome of AYAME and FALCON trials, and our discussions with the FDA regarding the bardoxolone program, we will decide future development plans for bardoxolone in additional forms of CKD.

Programs in Neurological Diseases

We are developing omaveloxolone for the treatment of patients with Friedreich’s ataxia, an inherited, debilitating, and degenerative neuromuscular disorder that is usually diagnosed during adolescence and can ultimately lead to premature death. In May 2022, the FDA accepted for filing our NDA for omaveloxolone for the treatment of patients with Friedreich’s ataxia and granted Priority Review.

Because mitochondrial dysfunction is a key feature of many neuromuscular diseases, we believe omaveloxolone may be broadly applicable to treat neurological diseases by activating Nrf2 to normalize and improve mitochondrial

function and adenosine triphosphate (ATP) production. We plan to pursue the development of omaveloxolone and our other Nrf2 activators for one or more additional neurological diseases.

We are also developing RTA 901 for the treatment of neurological diseases. RTA 901 is a highly potent and selective C-terminal modulator of Hsp90, which has a critical role in mitochondrial function, protein folding, and inflammation. RTA 901 has demonstrated profound efficacy in a wide range of animal models of neurological disease, including diabetic neuropathy, neuroinflammation, and neuropathic pain. We plan to initiate a randomized, placebo-controlled Phase 2 trial in DPNP in the fourth quarter of 2022.

Omaveloxolone in Patients with Friedreich’s Ataxia

Patients with Friedreich’s ataxia experience progressive loss of coordination, muscle weakness, and fatigue, which commonly progress to motor incapacitation and wheelchair reliance. Based on literature and proprietary research, we believe Friedreich’s ataxia affects approximately 5,000 children and adults in the United States and 22,000 individuals globally. According to data provided by IQVIA in 2020, there are approximately 4,000 projected patients diagnosed with Friedreich’s ataxia in the United States. The FDA has granted Orphan Drug Designation, Fast Track Designation, and Rare Pediatric Disease Designation to omaveloxolone for the treatment of Friedreich’s ataxia. The European Commission has granted Orphan Drug Designation in Europe to omaveloxolone for the treatment of Friedreich’s ataxia.

Diagnosis of Friedreich’s ataxia typically occurs by genetic testing, and most people in the United States with Friedreich’s ataxia are diagnosed in their teens and early twenties. Patients with Friedreich’s ataxia experience progressive loss of coordination, muscle weakness, and fatigue that commonly results in motor incapacitation, with patients requiring a wheelchair in their twenties. The mean age of death for patients with Friedreich’s ataxia is in the mid-thirties. Childhood-onset Friedreich’s ataxia can occur as early as age five, is more common than later-onset Friedreich’s ataxia, and normally involves more rapid disease progression. Currently, there are no approved therapies for the treatment of Friedreich’s ataxia.

MOXIe Part 2 Trial Results

Part 2 of our Phase 2 trial, called MOXIe (MOXIe Part 2), was an international, multi-center, double-blind, placebo-controlled, randomized, registrational trial that enrolled 103 patients with Friedreich’s ataxia at 11 trial sites in the United States, Europe, and Australia. MOXIe Part 2 was one of the largest global, interventional trials ever completed in Friedreich’s ataxia. Patients were randomized one-to-one to omaveloxolone or placebo. MOXIe Part 2 was completed in October 2019. The primary analysis population excluded patients with severe pes cavus (n=82), a musculoskeletal foot deformity that may interfere with the patient’s ability to perform some components of the neurological exam used to score the primary endpoint of the trial. Safety analyses were evaluated in the all-randomized population (n=103).

The primary endpoint for the trial was the change in the Modified Friedreich’s Ataxia Rating Scale (mFARS) score for omaveloxolone relative to placebo after 48 weeks of treatment. Omaveloxolone treatment demonstrated statistically significant evidence of efficacy for the primary endpoint of the trial, producing a placebo-corrected -2.40 point mean improvement in mFARS (n=82; p=0.014). Patients treated with omaveloxolone experienced a mean improvement in mFARS of -1.55 points from baseline, while patients treated with placebo experienced a mean worsening in mFARS of +0.85 points from baseline. Further, the observed placebo-corrected improvements in mFARS were time-dependent, increasing over the course of treatment with the largest improvement observed after 48 weeks of treatment.

Additionally, all secondary endpoints either favored the omaveloxolone arm or were neutral. Patients on omaveloxolone experienced a nominal improvement in the Activities of Daily Living (ADL) questionnaire, with all nine questions favoring the omaveloxolone arm. On average, ADL scores for patients on omaveloxolone did not change from baseline, while placebo-treated patients worsened. Both patient global impression of change (PGIC) and clinical global impression of change numerically favored omaveloxolone, and improvement in PGIC correlated with the observed improvement in mFARS.

Omaveloxolone was reported to be generally well-tolerated. Four (8%) omaveloxolone patients and two (4%) placebo patients discontinued trial drug due to an adverse event (AE). The reported AEs were generally mild to moderate in intensity, and the most common AEs (i.e., reported in > 10% of omaveloxolone-treated patients) observed more frequently (>5% difference) in omaveloxolone compared to placebo were headache, nausea, increased aminotransferases, fatigue, abdominal pain, diarrhea, oropharyngeal pain, muscle spasms, back pain, and decreased appetite. Increases in aminotransferases are a pharmacological effect of omaveloxolone. In preclinical studies, omaveloxolone has been shown to increase production of aminotransferases in vitro, which we believe are related to restoration of mitochondrial function. In MOXIe Part 2, the aminotransferase increases were associated with improvements (reductions) in total bilirubin and were not associated with any evidence of liver injury.

In MOXIe Part 2, the overall rate of serious adverse events (SAEs) was low, with five patients in the omaveloxolone group and three patients in the placebo group reporting SAEs. No new safety signals were identified, and the reported SAEs were sporadic and generally expected in Friedreich’s ataxia patients. In the patients who reported SAEs while receiving omaveloxolone, none led to discontinuation.

MOXIe Extension Trial

The open-label MOXIe Extension trial is ongoing and enrolled a total of 149 patients (57 patients from MOXIe Part 1 and 92 patients from MOXIe Part 2). A total of 73 out of 75 (97%) patients without severe pes cavus who completed MOXIe Part 2 were enrolled in the MOXIe Extension, including 39 patients previously randomized to placebo (the placebo-to-omaveloxolone group) and 34 patients previously randomized to omaveloxolone (the omaveloxolone-to-omaveloxolone group). Due to the COVID-19 pandemic, not all patients had mFARS assessments performed at each time point. The ongoing safety review of the MOXIe Extension trial has not identified any new safety signals, including cardiovascular safety.

Delayed-Start Analysis Results from August 2021 Data Cut-Off (Used in Clinical Modules of NDA submission)

The intent of the post-hoc Delayed-Start Analysis is to evaluate whether omaveloxolone has a persistent effect on Friedreich’s ataxia disease course. Conceptually, this analysis evaluates whether the treatment effect that was

observed in the placebo-controlled MOXIe Part 2 trial is maintained in the MOXIe Extension trial when all patients are receiving omaveloxolone. If the treatment effect is maintained between those originally randomized to placebo (the placebo-to-omaveloxolone group) versus those originally randomized to omaveloxolone (the omaveloxolone-to-omaveloxolone group), then it demonstrates evidence of a persistent effect on the course of the disease. If the treatment effect is not maintained, and the patients originally randomized to placebo are able to achieve the same absolute response and “catch up” to the patients initially randomized to omaveloxolone, the results are consistent with a symptomatic treatment that does not affect the underlying course of the disease.

Two timepoints were compared in the analysis. The first timepoint was at Week 48, the final week of treatment in the placebo-controlled MOXIe Part 2 trial. The second timepoint was at Week 72 of the open-label MOXIe Extension in which all patients received omaveloxolone. A non-inferiority test was used to evaluate if the difference in mFARS between groups observed at the first timepoint was maintained or non-inferior at the second timepoint. The analysis methods, including the specified non-inferiority margin, were based on literature (Liu-Seifert, 2015a, 2015b). When comparing treatment groups using this methodology, maintaining a negative difference between treatment groups in mFARS is evidence of a persistent treatment effect.

The Delayed-Start Analysis used in clinical modules in our initial NDA rolling submission for omaveloxolone was based on data from an August 2021 data cut-off. In this analysis 58 of 73 patients from MOXIe Part 2 without severe pes cavus who enrolled into MOXIe Extension had at least 72 weeks of exposure in MOXIe Extension, and 28 of these patients had at least 120 weeks of exposure in the MOXIe Extension.

Results of this analysis demonstrated that the between-group difference in mFARS observed at the end of the placebo-controlled MOXIe Part 2 period (least squares mean difference = -2.25 ± 1.07) was preserved at MOXIe Extension Week 72 in the delayed-start period (LS mean difference = -3.51 ± 1.45). Consistent with a persistent treatment effect on disease, the upper limit of the 90% confidence interval (CI) for the difference estimate was less than zero (-0.615), meeting the threshold for demonstrating significant evidence of non-inferiority.

Delayed-Start Analysis Primary Endpoint (Non-Inferiority Test)1


	Placebo-Controlled Week 48 (Δ1)	Delayed-Start Week Ex. 72 (Δ2)
Difference (LS Mean ± SE)	-2.25 ± 1.07 p=0.037	-3.51 ± 1.45 p=0.016
Estimate = Δ2 – 0.5 × Δ1	-2.39 ± 1.38
Upper Limit of 1-sided 90% CI for Estimate	-0.615
1Non-Inferiority test performed using a MMRM analysis with a Toeplitz covariance structure.

The graphical representation of changes from baseline in mFARS for omaveloxolone and placebo groups shows the separation at the end of the placebo-controlled period is maintained in the open-label period at Extension Week 72 and beyond.

Change from Baseline in mFARS (Patients without Severe Pes Cavus)

Many of the visits at Week 48 and Week 72 of the MOXIe Extension were scheduled during the initial peak of COVID-19 cases during Spring to Fall 2020. The mFARS assessment must be conducted in the clinic, and many in-clinic visits did not occur due to COVID-19 related travel restrictions and site closures during this period. Apart from the data at MOXIe Extension Week 48, parallel trajectories were seen in LS Mean mFARS change from baseline between the placebo-to-omaveloxolone group and the omaveloxolone-to-omaveloxolone group in the MOXIe Extension.

A longitudinal analysis was also performed to calculate annualized slopes incorporating all available data from the MOXIe Extension, which showed similar mean slopes in mFARS for the placebo-to-omaveloxolone group (0.45 ± 0.38 points per year) when compared to the omaveloxolone-to-omaveloxolone group (0.27 ± 0.59 points per year) with no significant difference between slopes (difference = -0.18 ± 0.67; p=0.79).

MOXIe Extension Annualized mFARS Change per Year (± SE)

Results from the Delayed-Start Analysis indicate a persistent omaveloxolone treatment effect on the disease course of Friedreich’s ataxia. Patients who received omaveloxolone during the double-blind MOXIe Part 2 had a benefit that could not be recovered by patients initially randomized to placebo who began omaveloxolone one year later in the MOXIe Extension. Notably, patients previously randomized to omaveloxolone in MOXIe Part 2 continued to show mean mFARS values that were similar to their original baseline after over three years of treatment.

Regulatory Guidance and Regulatory Interactions in the U.S.

Regulatory Guidance in the U.S. We are relying on section 115 of the Food and Drug Administration Modernization Act (FDAMA 115) and the December 2019 draft guidance thereunder from FDA on “Substantial Evidence of Effectiveness” as the basis for seeking approval of omaveloxolone in the U.S. The guidance provides that, if a sponsor has not conducted two adequate well-controlled studies, there are two alternative pathways to demonstrate substantial evidence of efficacy for drug approval; either:

(i)

a single adequate and well-controlled clinical study that has demonstrated a clinically meaningful and statistically very persuasive effect; or

(ii)

a single adequate and well-controlled clinical study plus confirmatory evidence.

Confirmatory evidence could include, for example, adequate and well-controlled clinical investigations in a related disease area, certain types of real world evidence such as extensive data on outcomes that provide further support for the lack of effect seen in the control group in the randomized trial, compelling mechanistic evidence in the setting of well-understood disease pathophysiology (e.g., pharmacodynamic data or compelling data from nonclinical testing), or well-documented natural history of the disease.

FDA may consider a number of factors when determining whether reliance on a single adequate and well-controlled clinical investigation plus confirmatory evidence is appropriate. These factors may include the persuasiveness of the single trial; the robustness of the confirmatory evidence; the seriousness of the disease, particularly where there is an unmet medical need; the size of the patient population; and whether it is ethical and practicable to conduct more than one adequate and well-controlled clinical investigation.

Regulatory Interactions Prior to NDA Acceptance. Following the announcement of the positive data from the MOXIe Part 2 study in October 2019, we met with the FDA in a Type C meeting in which the FDA provided us with guidance that it did not have any concerns with the reliability of the mFARS primary endpoint results in the MOXIe Part 2 study. Nevertheless, the FDA was not convinced that the MOXIe Part 2 results could support a single study approval without additional evidence that lends persuasiveness to the results. We believe their communication to us reflects their interpretation of the p-value, which while statistically significant, may not have met their threshold for a single study approval. This level of significance is challenging to generate in rare disease settings, such as Friedreich’s ataxia, since limited numbers of patients are available to enroll in clinical trials and they progress at a relatively slow rate over decades.

The FDA acknowledged the unmet need of patients with Friedreich’s ataxia, reiterated its commitment to facilitate the development of omaveloxolone within the constraints of the regulatory standards, and emphasized its willingness to consider all available options to meet the regulatory standards. In order to support a regulatory pathway of a single adequate and well-controlled clinical study plus confirmatory evidence for approval, we engaged with the FDA to determine what additional evidence they would consider to support an NDA submission and approval. The FDA subsequently requested a Delayed-Start Analysis.

During the first quarter of 2021, we submitted results from the Delayed-Start Analysis from a February 2021 data cut-off to the FDA as additional supporting evidence of effectiveness, and in May 2021 we received a communication from the FDA suggesting that, after a preliminary review of briefing materials for the Type C meeting, including the Delayed-Start Analysis, a pre-NDA meeting would be the most appropriate format for a discussion of the development program for omaveloxolone in Friedreich’s ataxia.

In the third quarter of 2021, we completed our pre-NDA meeting with the FDA. The purpose of the pre-NDA meeting was to discuss the content of Reata’s planned NDA submission including the nonclinical data and CMC packages, data standard plan, and the overall content plan. In the meeting, we stated that we believed that the MOXIe data, along with the Delayed-Start Analysis, would provide sufficient clinical data to support a full approval. The FDA stated that the proposed primary and supportive efficacy data appear reasonable, though the Delayed-Start Analysis was viewed as exploratory. The FDA noted that the ability of the data to support full approval, and the adequacy of the data and the determination of which data may be supportive of efficacy, would be a matter of review.

In November 2021, the FDA granted omaveloxolone Fast Track Designation for the treatment of Friedreich’s ataxia, providing eligibility for FDA programs such as Priority Review and rolling submission of the NDA, if relevant criteria are met. The FDA granted our request for a rolling submission, and, in March 2022, we completed submission of the NDA. In May 2022, the FDA accepted our NDA for filing and granted Priority Review Designation. The FDA advised us that it is planning to hold an advisory committee meeting to discuss the application. The PDUFA date is scheduled for November 30, 2022.

Recent Mid-Cycle Meeting Interactions. We recently completed a mid-cycle communication meeting with the FDA. The purpose of the mid-cycle communication meeting is for the FDA to provide the sponsor with an update of the status of the NDA review, including any issues identified. As is customary with the review of all NDAs, the FDA may identify other issues, and it may request additional information as it continues to review the NDA.

While we have not received formal minutes from the FDA, in the preliminary agenda for, and during, the mid-cycle communication meeting, the FDA stated that it has not identified any new significant issues but it continues to

have concerns regarding the strength of the efficacy evidence. The FDA noted specific points of discussion for the meeting including:

•

the pivotal study, MOXIe Part 2, is not exceptionally persuasive and has only weak support from the secondary endpoints;

•

the significant reduction in the number of patients in the Extension phase of MOXIe at each time point makes it challenging to interpret the Delayed-Start Analysis; and

•

there is a lack of support from MOXIe Part 1 as no dose-response relationship was observed.

With respect to a potential label, the FDA requested additional justification or literature to support the relevance of proposed biomarkers (ferritin, gamma-glutamyl transferase (GGT), alanine aminotransferase (ALT), and aspartate aminotransferase (AST)) to Nrf2 activation and how that would correlate with treatment benefit in Friedreich’s ataxia patients.

The FDA did not identify any significant clinical safety issues. The FDA stated that the safety review is ongoing, and they are continuing to evaluate the cardiac safety of omaveloxolone in patients with Friedreich’s ataxia. They have not identified any other major safety concerns at this stage of their review.

During the mid-cycle meeting, we proposed to address their concerns in three ways. First, regarding the interpretability of the Delayed-Start Analysis, we noted that the reduction in number of patients was primarily due to missed visits due to the COVID-19 pandemic and not due to study discontinuations. We then presented updated results from the Delayed-Start Analysis using a March 2022 data cut-off, which contain new, later time points and increased numbers of patients at later time points than the prior analysis. The FDA acknowledged these data and agreed that we could submit the updated data in a subsequent submission. See “Results from March 2022 Data Cut-Off of Delayed-Start Analysis of the MOXIe Extension” below.

Second, we proposed to submit a new propensity-matched matched analysis of MOXIe Extension data using the largest, most robust Friedreich’s ataxia natural history study to provide additional clinical data that could be considered confirmatory evidence. We noted that in the FDA’s draft guidance on Substantial Evidence of Effectiveness that confirmatory evidence could include comparison to reliable, systematically collected and well documented natural history of patients with the disease, especially when the natural history is well defined, the external control population is similar to the treated population, and standard of care and concomitant treatments are not substantially different. We described how Friedreich’s ataxia meets all of these criteria. The FDA acknowledged and agreed to allow us to submit a propensity score-matched comparison of the progression in mFARS of subjects in the Clinical Outcome Measures in Friedreich’s ataxia (FA-COMS) natural history study to the patients in our MOXIe Extension study (the Propensity-Matched Analysis). See “Post Hoc Propensity-Matched Analysis of MOXIe Extension” below.

Third, we discussed an additional NDA amendment containing compelling mechanistic evidence in the setting of Friedreich’s ataxia’s well-understood disease pathophysiology, which could also serve as confirmatory evidence. Friedreich’s ataxia is caused by genetic mutations in the frataxin gene that result in insufficient amounts of functional frataxin protein. At the cellular level, this deficiency is associated with impaired mitochondrial energy production, which correlates with impaired neurologic function as measured by mFARS scores in FA patients. Substantial evidence demonstrates that Nrf2 levels and activity are suppressed in FA, and suppressed Nrf2 activity directly contributes to the pathophysiology of FA. Omaveloxolone induces Nrf2, which coordinates the expression of several enzymes and the production of key cofactors that increase mitochondrial energy production. Data from MOXIe Part 2 showed an association between omaveloxolone-induced Nrf2 activity and measures of neurological function, with larger increases in Nrf2 target levels associated with larger improvements in mFARS scores. The FDA also acknowledged this information and agreed that we could submit additional mechanistic evidence that could serve as confirmatory evidence.

In this context, we also addressed the mid-cycle meeting comment about the lack of a dose-response relationship in MOXIe Part 1. We noted that, based on the small size and short duration of MOXIe Part 1, it was not intended to demonstrate definitive efficacy. However, the study did demonstrate dose-dependent increases in Nrf2 target proteins.

Post-Mid-Cycle Meeting Submissions. Since the mid-cycle communication meeting, we have subsequently submitted the following additional data and analyses to the FDA as NDA updates and amendments.

Updated data from the long-term MOXIe Extension trial to a data cut-off of March 2022 to address the interpretability of the Delayed-Start Analysis.

A propensity score-matched comparison of the progression in mFARS of subjects in the Clinical Outcome Measures in Friedreich’s ataxia (FA-COMS) natural history study to the patients in our MOXIe Extension study (the Propensity-Matched Analysis).

Mechanism of action data validating Nrf2, the target of omaveloxolone, as a key protein in the pathophysiology of Friedreich’s ataxia and clinical biomarker data showing that induction of Nrf2 target proteins in omaveloxolone-treated patients in the MOXIe Part 2 trial was associated with improvements in mFARS scores.

A detailed description of each of these submissions is included below.

Recently, we identified a specific data entry error in certain mFARS assessments at one of the MOXIe trial sites. We have determined that these errors had a negligible impact on the results of MOXIe Part 2, the Delayed-Start Analysis, and the Propensity-Matched Analysis. We have submitted a report to the FDA explaining the issue and the negligible impact on the studies.

The FDA may elect not to review data submitted in the new submissions or to delay the NDA review process and PDUFA date in response to any of these new submissions or any other issues the FDA identifies.

Results from March 2022 Data Cut-Off of Delayed-Start Analysis of the MOXIe Extension (Recently Submitted to FDA)

We recently submitted an update to the Delayed-Start Analysis to the FDA using a data cut-off in March 2022. In this updated analysis 63 of 73 patients from MOXIe Part 2 without severe pes cavus who enrolled into MOXIe Extension had at least 120 weeks of exposure in MOXIe Extension, and 40 of these patients had at least 144 weeks of exposure in the MOXIe Extension.

Results of this analysis demonstrated that the between-group difference in mFARS observed at the end of the placebo-controlled MOXIe Part 2 period (LS mean difference = -2.17 ± 1.09) was preserved at MOXIe Extension Week 72 in the delayed-start period (LS mean difference = -2.91 ± 1.44). Consistent with a persistent treatment effect on disease, the upper limit of the 90% CI for the difference estimate was less than zero (-0.09), meeting the threshold for demonstrating significant evidence of non-inferiority. Additionally, the between group difference in mFARS was maintained at Extension Week 96, 120, and 144 (LS mean difference = -2.19 ± 1.38, -2.74 ± 1.26, and -2.58 ± 1.47 respectively) and the threshold for non-inferiority was met at Week 120 with an upper limit of the 90% CI of -0.106.

Delayed-Start Analysis (Non-Inferiority Test)1


	Placebo-Controlled Week 48 (Δ1)	Delayed-Start Week Ex. 72 (Δ2)	Delayed-Start Week Ex. 96 (Δ2)	Delayed-Start Week Ex. 120 (Δ2)	Delayed-Start Week Ex. 144 (Δ2)
Difference (LS Mean ± SE)	-2.17 ± 1.089 p=0.0471	-2.91 ± 1.437 p=0.0433	-2.19 ± 1.375 p=0.1128	-2.74 ± 1.264 p=0.037	-2.58 ± 1.468 p=0.0796
Estimate = Δ2– 0.5 × Δ1	-	-1.826 ± 1.3535	-1.10 ± 1.2991	-1.657 ± 1.2086	-1.496 ± 1.4630
Upper Limit of 1-sided 90% CI for Estimate	-	-0.090*	0.567	-0.106*	0.382
1Non-Inferiority test performed using a MMRM analysis with a Toeplitz covariance structure. *Threshold for non-inferiority was met.

Change from Baseline in mFARS (Patients without Severe Pes Cavus)

A longitudinal analysis was also performed on the updated data to calculate annualized slopes incorporating all available data from the MOXIe Extension through Week 144. The results showed no significant difference in slope between the placebo-to-omaveloxolone group and the omaveloxolone-to-omaveloxolone group (p=0.66).

MOXIe Extension Annualized mFARS Slope Through Extension Week 144 (± SE)


	mFARS Change per Year
Omaveloxolone-to-Omaveloxolone (n=34)	0.446 ± 0.6340
Placebo-to-Omaveloxolone (n=39)	0.760 ± 0.2773
Difference	-0.314 ± 0.7118 p=0.6602

The resulting parallel trajectories between both treatment groups are consistent with the hypothesis that earlier omaveloxolone treatment altered the disease course. Patients who received omaveloxolone during the double-blind MOXIe Part 2 had a benefit that could not be recovered by patients initially randomized to placebo who began omaveloxolone one year later in MOXIe Extension.

Post Hoc Propensity-Matched Analysis of MOXIe Extension (Recently Submitted to FDA)

The intent of the Post-Hoc Propensity-Matched Analysis of MOXIe Extension is to facilitate interpretation of the open-label MOXIe Extension study using an external control, thus providing confidence in the durability of the treatment response. Accruing data in MOXIe Extension provides longer term follow-up for disease progression in patients receiving omaveloxolone; however, there is no long-term placebo arm for comparison.

MOXIe Extension data were compared to natural history external controls using propensity matching to provide longer term efficacy data in support of the statistically significant benefit demonstrated by pivotal MOXIe Part 2. Conceptually, the analysis compares the mFARS progression of omaveloxolone-treated patients in the open-label MOXIe Extension trial to the observed progression of propensity score-matched untreated patients in an external control group. Propensity matching is a statistical methodology utilized to identify and match patients in the MOXIe Extension study with patients in the external control group who are expected to have a similar disease progression based on the prognostic factors used to calculate the propensity scores.

The largest natural history study of Friedreich’s ataxia, FA-COMS, is a global, multi-center, longitudinal, prospective observational study that has enrolled more than 1,250 patients, with follow-up as long as 19 years in some patients. Clinical outcome measures, including mFARS, are assessed annually. The mFARS is a clinician-observed/performance-based outcome, all FA-COMS sites are tertiary care centers specializing in Friedreich’s ataxia, and all mFARS assessments are conducted in a standardized manner by trained neurologists with experience in Friedreich’s ataxia and other ataxias. The score for each component of mFARS is based on measurements of a patient’s functional ability using the same standardized set of instructions in both studies. Therefore, the significant

overlap in sites, which provides a similar testing environment to patients across studies, and the use of the same standardized instructions for the FARS assessment make the methodology for mFARS assessments across the 2 studies highly comparable. The FA-COMS database constitutes a well-established, reliable, and well documented source of natural history data for Friedreich’s ataxia.

Patients from FA-COMS were matched to MOXIe Extension patients using propensity scores based on multiple covariates: sex, baseline age, age of Friedreich’s ataxia onset, baseline mFARS score, and baseline gait score. Selection of these covariates was based on clinical relevance (i.e., factors considered prognostic for Friedreich’s ataxia progression) and availability in both studies. The change from baseline in mFARS at Year 3 for MOXIe Extension patients compared to the propensity score-matched FA-COMS patients was analyzed as the primary efficacy endpoint using mixed model repeated measures (MMRM) analysis. Change from baseline in mFARS at Year 1 and Year 2 were secondary endpoints. Data from MOXIe Part 1 and MOXIe Part 2 were not included in this propensity-matched analysis. Only data from MOXIe Extension were compared to natural history data. The matching was carried out as optimal 1:1 matching without replacement which resulted in equal sized groups for analysis.

For inclusion in each of the study populations patients must have had (1) baseline mFARS, (2) at least one post-baseline mFARS within 3 years after baseline, and (3) values for all propensity score model covariates (i.e., sex, baseline mFARS score, age at baseline, age of Friedreich’s ataxia onset, and baseline gait score). The MOXIe Extension study population included 136 patients. Of these, 95 patients were essentially treatment naïve at the time of entry into MOXIe Extension (i.e., includes those patients who received placebo in MOXIe Part 2 or had participated in MOXIe Part 1 and been off treatment for a long time), and the other 41 patients were continuing treatment (i.e., includes those patients who received omaveloxolone in MOXIe Part 2). The primary natural history (i.e., FA-COMS) study population included 598 patients eligible for matching with the MOXIe Extension population. There are three primary analysis populations, each based on a propensity score match with the FA-COMS study population: (1) Primary Pooled (n=272; 136 in each group), (2) Placebo-to-Omaveloxolone (n=190; 95 in each group), and (3) Omaveloxolone-to-Omaveloxolone (n=82; 41 in each group). Demographics and baseline characteristics were highly comparable between MOXIe Extension patients and the matched FA-COMS external control groups.

Propensity-Matched Analysis: Demographics and Baseline Characteristics Used for Propensity Score Calculation (Primary Pooled Population)


Characteristic	Statistic	Matched FA-COMS (n=136)	MOXIe Extension (n=136)
Age (years)	Mean (SD)	26.2 (13.72)	26.6 (7.26)
Age at Friedreich’s ataxia Onset	Mean (SD)	15.2 (10.48)	15.5 (5.30)
Sex, Female	N (%)	70 (51.5%)	70 (51.5%)
mFARS	Mean (SD)	41.0 (16.10)	42.2 (12.60)
Gait	Mean (SD)	2.7 (1.69)	2.8 (1.36)

In the Primary Pooled Population (n=272; 136 patients in each treatment group), by Year 3, patients in the FA-COMS matched set progressed 6.61 mFARS points whereas patients treated with omaveloxolone in MOXIe Extension progressed 3.00 points for a difference of -3.61 mFARS points (nominal p=0.0001). In this analysis, progression in mFARS was 55% slower in MOXIe Extension patients treated with omaveloxolone compared to matched untreated patients in the FA-COMS study.

Propensity-Matched Analysis: LS Mean Change from Baseline in mFARS Scores (Primary Pooled Population)


	Baseline		Year 1		Year 2		Year 3
	N	Mean (SD)	N	LS Mean (SE)	N	LS Mean (SE)	N	LS Mean (SE)
MOXIe Extension	136	42.22 (12.60)	133	0.015 (0.56)	102	1.18 (0.59)	77	3.00 (0.66)
Matched FA-COMS	136	41.03 (16.10)	108	2.11 (0.59)	103	4.58 (0.59)	83	6.61 (0.65)
Difference	-	-	-	-2.10 (0.81) p=0.0101	-	-3.41 (0.84) p< 0.0001	-	-3.61 (0.93) p=0.0001

In the pivotal MOXIe Part 2, omaveloxolone treated patients had experienced a reduction (i.e., an improvement) in mFARS score relative to the placebo group. The MOXIe Extension patients from the Primary Placebo-to-Omaveloxolone Population were essentially treatment-naïve at the time of entry into MOXIe Extension. After initiation of omaveloxolone treatment, at Year 1 this group experienced an improvement of neurologic function (as assessed by mFARS) relative to baseline. At Year 1, the treatment difference (-2.75 mFARS points; nominal p=0.0035) was similar in magnitude to the pivotal MOXIe Part 2 treatment difference in the primary analysis population (i.e., the Full Analysis Set) at Week 48 (-2.40 mFARS points).

Propensity-Matched Analysis: LS Mean Change in mFARS Scores (Primary Placebo-to-Omaveloxolone Population)


	Baseline		Year 1		Year 2		Year 3
	N	Mean (SD)	N	LS Mean (SE)	N	LS Mean (SE)	N	LS Mean (SE)
MOXIe Extension	95	42.81 (12.79)	95	-0.43 (0.63)	69	1.18 (0.69)	56	3.21 (0.76)
Match FA-COMS	95	44.54 (18.04)	72	2.32 (0.69)	71	4.23 (0.68)	64	7.29 (0.72)
Difference	-	-	-	-2.75 (0.94) p=0.0035	-	-3.06 (0.97) p=0.0017	-	-4.09 (1.05) p=0.0001

In the Primary Omaveloxolone-to- Omaveloxolone Population, the treatment effect favored omaveloxolone treated patients relative to FA-COMS external controls at Year 1 and Year 2. A smaller difference between treatment groups was observed at Year 1 in the Omaveloxolone-to- Omaveloxolone Population than in the Placebo-to-Omaveloxolone Population. The MOXIe Extension patients in the Omaveloxolone-to- Omaveloxolone Population did not experience an improvement from baseline likely because they were in their second year of treatment with active drug. Of note, this group did experience persistence of benefit relative to the matched FA-COMS external control. The Omaveloxolone-to- Omaveloxolone Population represents the patients treated for the longest total duration, having previously received omaveloxolone in MOXIe Part 2. The treatment effect favored MOXIe Extension at each visit and consistently increased over time in this population in comparison to the FA-COMS external control group.

Propensity-Matched Analysis: LS Mean Change in mFARS Scores (Primary Omaveloxolone-to-Omaveloxolone Population)


	Baseline		Year 1		Year 2		Year 3
	N	Mean (SD)	N	LS Mean (SE)	N	LS Mean (SE)	N	LS Mean (SE)
MOXIe Extension	41	40.85 (12.19)	38	1.05 (1.09)	33	1.10 (1.13)	21	2.38 (1.33)
Match FA-COMS	41	39.64 (16.80)	34	2.48 (1.12)	33	3.57 (1.13)	25	6.14 (1.24)
Difference	-	-	-	-1.43 (1.56) p=0.3641	-	-2.47 (1.60) p=0.1265	-	-3.76 (1.82) p=0.0400

The FA-COMS study constitutes a well-established, reliable, and well documented source of natural history data for Friedreich’s ataxia. We acknowledge the limitations of a post-hoc, cross-study comparison. However, in the situation of a rare disease such as Friedreich’s ataxia, we propose these data comparing the long-term efficacy outcomes for omaveloxolone to propensity-matched natural history data provide confirmatory evidence of effectiveness for omaveloxolone for the treatment of Friedreich’s ataxia.

Mechanistic Validation of Nrf2 Target Biomarkers in Friedreich’s ataxia

During the mid-cycle communication meeting discussion, the division requested to see the pharmacodynamic data contextualized with a discussion of the supporting independent literature regarding proposed biomarkers for label purposes. We have responded to the FDA’s request and, as briefly summarized below, we provided additional information including an integrated and detailed presentation of the disease pathophysiology of Friedreich’s ataxia, a review of the available pharmacodynamic data, justification of the relevance of these data in Friedreich’s ataxia, and an explanation of the relationship between the mechanistic data and the observed biomarker and clinical treatment effects in patients treated with omaveloxolone. As stated in the meeting, we believe these data do not just address their discussion topics regarding labeling but could also provide confirmatory evidence.

Friedreich’s ataxia is caused by genetic mutations in the frataxin (FXN) gene that result in insufficient amounts of FXN. At the cellular level, FXN deficiency is associated with impaired mitochondrial function, redox imbalance, and iron dysregulation. Additionally, lower mitochondrial function correlates with impaired neurologic function as measured by mFARS score in patients with Friedreich’s ataxia. Substantial evidence demonstrates that Nrf2 levels and activity are suppressed in cells from patients with Friedreich’s ataxia and in preclinical animal models of the disease. Although the molecular mechanism by which frataxin deficiency suppresses Nrf2 has not been fully characterized, dysregulated Nrf2 signaling is a common early upstream event that contributes to impaired mitochondrial energy production and redox imbalance in patients with Friedreich’s ataxia.

Nrf2 is a transcription factor that binds to specific DNA sequences called antioxidant response elements (AREs) that are located in the promoter regions of Nrf2 target genes. Binding to AREs allows Nrf2 to increase the transcription of its target genes, which play key roles in cellular metabolism and bioenergetic processes. Nrf2 target genes include γ-glutamyl transferase (GGT1), which plays a key role in redox balance, and ferritin heavy chain 1 (FTH1) and ferritin light chain (FTL), which combine to form ferritin, a protein involved in iron handling. By coordinating the expression of several enzymes and the production of key cofactors, Nrf2 activation restores redox balance, regenerates reducing equivalents, and modulates iron handling. Together, these effects increase the production of cellular energy (i.e., ATP) within the mitochondria in Friedreich’s ataxia patient fibroblasts and Friedreich’s ataxia disease models.

Treatment with omaveloxolone in MOXIe Part 1 resulted in dose-dependent increases in Nrf2 activity, as assessed by serum ferritin and GGT levels. Data from MOXIe Part 2 showed an association between omaveloxolone-induced Nrf2 activity and measures of neurological function, with larger increases in Nrf2 target levels associated with larger improvements in mFARS scores. Taken together, these data indicate that omaveloxolone rescues Nrf2 activity that is suppressed in patients with Friedreich’s ataxia and that the increase in Nrf2 activity is associated with a therapeutic benefit in these patients.

Regulatory Interactions in Europe

We are continuing to complete the regulatory procedures and submissions required prior to filing an MAA in Europe for approval of omaveloxolone for the treatment of patients with Friedreich’s ataxia. We have received a positive opinion from the Pediatric Committee on our Pediatric Investigation Plan with a commitment to seek scientific advice for additional input on the protocol design, and we also received EMA Follow-Up Protocol Assistance feedback regarding our nonclinical and CMC programs. The EMA feedback indicated that there were no identified impediments

to our planned MAA submission and included agreement that certain nonclinical studies, including 2-year carcinogenicity study data, may be submitted after approval. We plan to submit an MAA to the EMA for omaveloxolone in the fourth quarter of 2022.

Omaveloxolone in Other Neurological Indications

Omaveloxolone is a promising platform molecule. Because mitochondrial dysfunction is a key feature of many neurological and neuromuscular diseases, we believe omaveloxolone may be broadly applicable to treat such diseases by activating Nrf2 to normalize and improve mitochondrial function and ATP production.

Based on our understanding of the pathophysiology of neurological diseases characterized by mitochondrial dysfunction, inflammation, and oxidative stress, we believe omaveloxolone may be applicable to diseases such as progressive supranuclear palsy, Parkinson’s disease, frontotemporal dementia, Huntington’s disease, amyotrophic lateral sclerosis (ALS), Alzheimer’s disease, and epilepsy. Consistent with this, we have observed promising activity of omaveloxolone and our other Nrf2 activators in preclinical models of many of these diseases.

Our Nrf2 activators reduced seizure frequency in refractory, progressive epilepsy models and restored mitochondrial function in patient biopsy samples and preclinical models of Friedreich’s ataxia, ALS, familial and sporadic Parkinson’s disease, and frontotemporal dementia. In clinical trials, improvements in neuromuscular function have been observed in patients with Friedreich’s ataxia treated with omaveloxolone as assessed by mFARS, and improvements in mitochondrial function, as measured by reductions in blood lactate and heart rate, have been observed in patients with primary mitochondrial disease. Accordingly, we believe that omaveloxolone has the potential to treat a number of neurological and neuromuscular diseases that currently have few or no effective therapies, and we plan to pursue the development of omaveloxolone and our other Nrf2 activators for one or more of these diseases.

RTA 901 in Neurological Diseases

RTA 901 is the lead product candidate from our Hsp90 modulator program, which includes highly potent and selective C-terminal modulators of Hsp90. We have observed favorable activity of RTA 901 in a range of preclinical models of neurological disease, including models of diabetic neuropathy, neuroinflammation, and neuropathic pain.

Historically, other companies have explored N-terminal Hsp90 inhibitors for cancer therapeutics; however, this approach has been associated with multiple AEs including peripheral neuropathy and ocular toxicity. Binding at the C-terminus of Hsp90 leads to increased transcription of Hsp70, a cytoprotective and molecular chaperone gene, which facilitates cell survival in response to stress without the deleterious activities of N-terminal inhibition.

In preclinical rodent disease models, we observed that RTA 901 administered orally once-daily rescued existing nerve function, restored thermal and mechanical sensitivity, and improved nerve conductance velocity and mitochondrial function. These effects are dose-dependent, reversible, and Hsp70-dependent.

We completed a Phase 1 SAD/MAD trial of oral, once-daily RTA 901 in healthy adult volunteers to evaluate the safety, tolerability, and PK profile. The PK was approximately dose-proportional up to the highest doses evaluated with a half-life ranging from two to nine hours. Human exposures easily exceeded the exposures necessary for efficacy in multiple animal models. No safety or tolerability concerns were reported. In the first quarter of 2022, we initiated additional Phase 1 clinical pharmacology studies of RTA 901, including a drug-drug interaction study which has been fully enrolled. Following completion of these Phase 1 studies, we plan to initiate a randomized, double-blind placebo-controlled Phase 2 trial of RTA 901 in diabetic patients with peripheral neuropathic pain in the fourth quarter of 2022. We are the exclusive licensee of RTA 901 and have worldwide commercial rights.

Programs in Chronic Kidney Disease

We and Kyowa Kirin, our strategic collaborator in CKD in Japan, are developing bardoxolone for the treatment of CKD in multiple indications, including CKD caused by Alport syndrome, ADPKD, and type 1 and 2 diabetic CKD. CKD is characterized by a progressive worsening in the rate at which the kidney filters waste products from the blood, called the glomerular filtration rate (GFR). eGFR is an estimate of GFR that nephrologists use to track the decline in kidney function and progression of CKD. When GFR gets too low, patients develop end-stage kidney disease (ESKD) and require dialysis or a kidney transplant to survive.

Bardoxolone in Patients with CKD Caused by Alport Syndrome

Alport syndrome is a rare, genetic form of CKD caused by mutations in the genes encoding type IV collagen, which is a major structural component of the glomerular basement membrane in the kidney. The kidneys of patients with Alport syndrome progressively lose the capacity to filter waste products out of the blood, which can lead to ESKD and the need for chronic dialysis treatment or a kidney transplant. Alport syndrome affects both children and adults and can manifest as early as the first decade of life and causes average annual declines in eGFR of approximately four to five mL/min/1.73 m2. In patients with the most severe forms of the disease, approximately 50% progress to dialysis by age 25, 90% by age 40, and nearly 100% by age 60. There are currently no approved therapies to treat CKD caused by Alport syndrome.

The Alport Syndrome Foundation has estimated that Alport syndrome affects approximately 30,000 to 60,000 people in the United States. According to data provided by IQVIA in 2020, there are approximately 14,000 projected patients diagnosed with Alport syndrome in all stages of CKD in the United States. However, recent literature suggests that a large number of patients with Alport syndrome are either undiagnosed or misdiagnosed with other forms of CKD.

On February 25, 2022, we received a CRL from the FDA with respect to its review of our NDA for bardoxolone in the treatment of patients with CKD caused by Alport syndrome. The CRL indicated that the FDA cannot approve the NDA in its present form. Based on its review, the FDA concluded that it does not believe the submitted data demonstrates that bardoxolone is effective in slowing the loss of kidney function in patients with Alport syndrome and reducing the risk of progression to kidney failure and has requested additional data to support the efficacy and safety of bardoxolone. Their conclusion was based on efficacy and safety concerns primarily set forth in the FDA’s briefing book and discussed at the Cardiovascular and Renal Drugs Advisory Committee meeting held on December 8, 2021.

The FDA stated that the issues could be resolved by providing evidence of effectiveness that includes evidence from an adequate and well-controlled study showing a clinically relevant effect on the rate of loss of kidney function in patients with Alport syndrome or, alternatively, an effect on a clinical outcome (i.e., an endpoint that captures how patients with Alport syndrome feel, function, or survive). In addition, the FDA stated that we would need to address whether bardoxolone has a clinically relevant effect on the QT interval and show that the demonstrated clinical benefits of bardoxolone outweigh its risks. The FDA welcomed continued discussion on the details of a path forward. We have recently requested a Type C meeting to discuss the program and continue to work with the FDA to confirm our next steps on our Alport syndrome program.

In October 2021, we submitted an MAA to the EMA for bardoxolone in the treatment of patients with CKD caused by Alport syndrome. In the first quarter of 2022, we received the 120-day list of questions from the EMA. We are in the process of preparing our responses. We previously requested a 90-day extension for our responses which was granted by the EMA. We plan to submit additional long-term extension data from the ongoing EAGLE trial to address the comments and questions raised by the EMA and have been granted a further 30-day extension to complete our responses.

Bardoxolone in Patients with Autosomal Dominant Polycystic Kidney Disease

ADPKD is a rare and serious hereditary form of CKD caused by a genetic defect in PKD1 or PKD2 genes leading to the formation of fluid-filled cysts in the kidneys and other organs. Cyst growth can cause the kidneys to expand up to five to seven times their normal volume, leading to pain and progressive loss of kidney function. Inflammation appears to play a role in cyst growth and is associated with disease progression in ADPKD.

ADPKD affects both men and women of all racial and ethnic groups and is the leading inheritable cause of kidney failure with an estimated diagnosed population of 140,000 patients and an estimated prevalent population of 400,000 patients in the United States. Despite current standard-of-care treatment, an estimated 50% of ADPKD patients progress to ESKD and require dialysis or a kidney transplant by 60 years of age. The only therapy currently approved for ADPKD is JYNARQUE® (tolvaptan), developed by Otsuka Pharmaceuticals Co., Ltd., which was approved in the United States in 2018 to slow kidney function decline in adults at risk of rapidly progressing ADPKD.

We are currently enrolling patients in FALCON, an international, multi-center, randomized, double-blind, placebo-controlled trial studying the safety and efficacy of bardoxolone in patients with ADPKD randomized one-to-one to active drug or placebo. FALCON is enrolling 850 patients in a broad range of ages, with an eGFR between 30 and 90 mL/min/1.73 m2. The primary endpoint of the study is the off-treatment eGFR change from baseline at Week 108 (eight weeks after planned drug discontinuation at Week 100). All patients will be asked to return at Week 108

independent of the time of study drug discontinuation. The secondary endpoint is the eGFR change from baseline at Week 100. More than 580 patients are currently enrolled in the trial.

In the first quarter of 2022, we finalized a protocol amendment to FALCON, and initiated submission of the amendment to the FDA and other relevant health authorities. The major protocol amendment modifications include changing the primary endpoint of off-treatment eGFR change from baseline at Week 52 (or four weeks after drug discontinuation in Year 1) to eGFR change from baseline at Week 108 (eight weeks after planned drug discontinuation at Week 100). The major protocol amendment is under review in the applicable countries where FALCON is being conducted. We have received queries regarding the proposed changes from several countries and are actively working through the regulatory processes to secure approval to implement the amendment as agreed with the FDA. There is a possibility that approval for the amendment may either be delayed or denied in one or more countries. Failure to receive approval for the protocol amendment in multiple countries could materially adversely affect the trial results.

AYAME Trial in Diabetic CKD Conducted by Kyowa Kirin

Upon completion of Kyowa Kirin’s Phase 2 TSUBAKI trial of bardoxolone in patients with Stage 3 and 4 diabetic CKD in Japan, and after discussions with the Pharmaceuticals and Medical Devices Agency, Kyowa Kirin initiated a Phase 3 outcomes trial called AYAME in patients with Stage 3 or 4 diabetic CKD in Japan. The primary endpoint is time to onset of a ≥ 30% decrease in eGFR from baseline or ESKD. The secondary endpoints are time to onset of a ≥ 40% decrease in eGFR from baseline or ESKD, time to onset of a ≥ 53% decrease in eGFR from baseline or ESKD, time to onset of ESKD, and change in eGFR from baseline at each evaluation time point. Kyowa Kirin completed patient enrollment in AYAME in June 2019 and expects the last patient visit to occur in the second half of 2022.

United States Commercial Readiness

With the acceptance of our NDA for omaveloxolone and a Priority Review designation, we are advancing commercial launch preparations in the United States. We are in the process of building the commercial infrastructure necessary to effectively support the commercialization of omaveloxolone for the treatment of Friedreich’s ataxia, if and when we receive regulatory approval. Commercial launch preparation for omaveloxolone in Friedreich’s ataxia will continue to advance in step with the regulatory progress.

Our ability to launch omaveloxolone is dependent on the successful defense of an NDA and approval by the FDA. We have hired commercial leadership and intend to build the teams, infrastructure, systems, and processes necessary for the launch of omaveloxolone. This will include sales, marketing, market access, patient support, and distribution. Additionally, we are expanding quality and compliance functions to support commercialization. A trade name for omaveloxolone has been selected.

One challenge unique to rare-disease commercialization is patient identification due to the very small and sometimes heterogeneous disease populations. Our management team is experienced in maximizing patient identification for both clinical development and commercialization purposes in rare diseases. Commercial infrastructure for orphan products typically consists of a targeted, specialty sales force that calls on a limited and focused group of physicians and personnel involved in sales management, internal sales support, marketing, patient access, and distribution.

Ex-United States Commercial Readiness

Our ability to launch omaveloxolone is dependent on the successful filing and defense of an MAA and approval by EMA or other regulatory agencies. Outside of the United States, where appropriate and depending on the terms of our contractual arrangements, we plan, either alone, or with new collaboration partners, to commercialize our products. Our strategic collaborator Kyowa Kirin has all rights to commercialize bardoxolone in its territories. We are refining our strategy and market assessments with respect to potential launches in the EU, and we continue to evaluate market opportunities for our products in other global markets. Commercial launch preparation for omaveloxolone in Friedreich’s ataxia outside of the United States will advance in step with the regulatory progress.

Update on Adjustments to Operations Due to COVID-19

When COVID-19 emerged as a global pandemic in the first quarter of 2020, we were quick to respond and were an early adopter of a work-from-home policy, with the exception of the laboratory, which continued to operate throughout under strict safety protocols. For all remote employees, we provided appropriate workstation equipment

as well as training and resources to support employees’ mental and emotional wellbeing. We continue to operate under a hybrid work schedule encouraging office-based employees to work with their respective functional leaders to agree to flexible work schedules that meet both business and personal needs. For field-based medical affairs personnel, we are working with health care professionals to schedule in-person meetings/attend conferences where practical and in accordance with policy and regulatory guidance. We continue to update our Pandemic Management Plan as circumstances dictate in order to minimize risk and protect the wellbeing of employees.

Corporate Overview

To date, we have focused most of our efforts and resources on developing our product candidates and conducting preclinical studies and clinical trials. We have historically financed our operations primarily through revenue generated from our collaborations with AbbVie and Kyowa Kirin, from sales of our securities, secured loans, and a strategic financing from BXLS. We have not received any payments or revenue from collaborations other than nonrefundable upfront, milestone, and cost sharing payments from our collaborations with AbbVie and Kyowa Kirin, from the Development Agreement with BXLS, and from reimbursements of expenses under the terms of our agreement with Kyowa Kirin. We have incurred losses in each year since our inception, other than in 2014. As of June 30, 2022, we had $147.2 million of cash and cash equivalents and an accumulated deficit of $1,403.0 million. We continue to incur significant research and development and other expenses related to our ongoing operations. Despite contractual product development commitments and the potential to receive future payments from Kyowa Kirin, we anticipate that we will continue to incur losses for the foreseeable future, and we anticipate that our losses will increase as we continue our development of, seek regulatory approval for, and potentially commercialize our product candidates. If we do not successfully develop and obtain regulatory approval of our existing product candidates or any future product candidates and effectively manufacture, market, and sell any products that are approved, we may never generate revenue from product sales. Furthermore, even if we do generate revenue from product sales, we may never again achieve or sustain profitability on a quarterly or annual basis. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital. Our failure to become and remain profitable could depress the market price of our Class A common stock and could impair our ability to raise capital, expand our business, diversify our product offerings, or continue our operations.

The probability of success for each of our product candidates and clinical programs and our ability to generate product revenue and become profitable depend upon a variety of factors, including the quality of the product candidate, clinical results, investment in the program, competition, manufacturing capability, commercial viability, and our collaborators’ ability to successfully execute our development and commercialization plans. We will also require additional capital through equity, debt, or royalty financings or collaboration arrangements in order to fund our operations and execute on our business plans, and there is no assurance that such financing or arrangements will be available to us on commercially reasonable terms or at all. For a description of the numerous risks and uncertainties associated with product development and raising additional capital, see “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Financial Operations Overview

Revenue

Our revenue to date has been generated primarily from licensing fees received under our collaborative license agreements and reimbursements for expenses. We currently have no approved products and have not generated any revenue from the sale of products to date. In the future, we may generate revenue from product sales, royalties on product sales, reimbursements for collaboration services under our current collaboration agreements, or license fees, milestones, or upfront payments if we enter into any new collaborations or license agreements. We expect that our future revenue will fluctuate from quarter to quarter for many reasons, including the uncertain timing and amount of any such payments and sales.

Our license and milestone revenue has been generated primarily from the Kyowa Kirin Agreement, the AbbVie License Agreement, and the Collaboration Agreement and consists of upfront payments and milestone payments. License revenue recorded with respect to the Kyowa Kirin Agreement, the AbbVie License Agreement, and the Collaboration Agreement consists solely of the recognition of deferred revenue. Under our revenue recognition policy, collaboration revenue associated with upfront, non-refundable license payments received under our license and collaboration agreements are deferred and recognized ratably over the expected term of the performance obligations under each agreement. Under the Reacquisition Agreement, we no longer have performance obligations under the

AbbVie License Agreement and the Collaboration Agreement. Under the Kyowa Kirin Agreement, we will not recognize any deferred revenue subsequent to June 30, 2022.

Research and Development Expenses

The largest component of our total operating expenses has historically been our investment in research and development activities, including the clinical development of our product candidates. From our inception through June 30, 2022, we have incurred a total of $1,169.1 million in research and development expense, a majority of which relates to the development of bardoxolone and omaveloxolone. We expect our research and development expense to continue to increase in the future as we advance our product candidates through clinical trials and expand our product candidate portfolio. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and we consider the active management and development of our clinical pipeline to be crucial to our long-term success. The actual probability of success for each product candidate and preclinical program may be affected by a variety of factors, including the safety and efficacy data for product candidates, investment in the program, competition, manufacturing capability, and commercial viability.

Research and development expenses include:

•

expenses incurred under agreements with clinical trial sites that conduct research and development activities on our behalf;

•

expenses incurred under contract research agreements and other agreements with third parties;

•

employee and consultant-related expenses, which include salaries, benefits, travel, and stock-based compensation;

•

laboratory and vendor expenses related to the execution of preclinical and non-clinical studies and clinical trials;

•

the cost of acquiring, developing, manufacturing, and distributing clinical trial materials;

•

the cost of development, scale up, and process validation activities to support product registration; and

•

facilities, depreciation, and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance, and other supply costs.

Research and development costs are expensed as incurred. Costs for certain development activities such as clinical trials are highly judgmental and are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites.

We base our expense accruals related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical trials and preclinical studies on our behalf. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing costs, we estimate the time period over which services will be performed and the level of effort to be expended in each period.

To date, we have not experienced material changes in our estimates of accrued research and development expenses after a reporting period. However, due to the nature of estimates, we cannot assure you that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical trials and other research activities.

Currently, Kyowa Kirin has allowed us to conduct clinical studies of bardoxolone in certain rare forms of kidney diseases in Japan and has reimbursed us the majority of the costs for our CARDINAL study in Japan. Kyowa Kirin is the in-country caretaker in our FALCON study in Japan and we are reimbursing Kyowa Kirin for the costs of a certain number of patients in the study.

The following table summarizes our research and development expenses incurred during the three and six months ended June 30:


	Three Months Ended				Six Months Ended
	June 30				June 30
	2022		2021		2022		2021
	(in thousands)
Bardoxolone	$	7,956	$	14,979	$	14,418	$	26,365
Omaveloxolone		7,284		482		13,881		2,954
RTA 901		2,226		3,121		3,633		3,827
Other research and development expenses		21,865		21,484		47,204		41,800
Total research and development expenses	$	39,331	$	40,066	$	79,136	$	74,946

The program-specific expenses summarized in the table above include costs that we directly allocate to our product candidates. Our other research and development expenses include salaries, benefits, stock-based compensation and preclinical, research, and discovery costs, which we do not allocate on a program-specific basis.

General and Administrative Expenses

General and administrative expenses consist primarily of employee-related expenses for executive, operational, finance, legal, compliance, and human resource functions. Other general and administrative expenses include personnel expense, facility-related costs, professional fees, accounting and legal services, depreciation expense, other external services, and expenses associated with obtaining and maintaining our intellectual property rights.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development and potential commercialization of our product candidates. We have also incurred, and anticipate incurring in the future, increased expenses associated with being a public company, including exchange listing and SEC requirements, director and officer insurance premiums, legal, audit and tax fees, compliance with the Sarbanes-Oxley Act, regulatory compliance programs, and investor relations costs. Additionally, if and when we believe the first regulatory approval of one of our product candidates appears likely, we anticipate an increase in payroll and related expenses as a result of our preparation for commercial operations, especially for the sales and marketing of our product candidates.

Other Income (Expense), Net

Other income (expense) includes interest and gains earned on our cash and cash equivalents, and marketable debt securities, amortization of debt issuance costs, imputed interest on long term payables, foreign currency exchange gains and losses, and non-cash interest expense on liability related to the sale of future royalties.

Benefit from (Provision for) Taxes on Income

Provision for taxes on income consists of net loss, taxed at federal tax rates and adjusted for certain permanent differences. Realization of deferred tax assets is generally dependent upon future earnings by jurisdiction, of which the timing and amount are uncertain for the majority of our deferred tax assets, and valuation allowances are maintained against them. Changes in valuation allowances also affect the tax provision.

Results of Operations

Comparison of the Three Months Ended June 30, 2022 and 2021 (unaudited)

The following table sets forth our results of operations for the three months ended June 30:


	2022			2021			Change $			Change %
	(in thousands, except for percentage data)
Collaboration revenue
License and milestone	$	754		$	803		$	(49	)		(6	)
Other revenue		8			1,418			(1,410	)		(99	)
Total collaboration revenue		762			2,221			(1,459	)		(66	)
Expenses
Research and development		39,331			40,066			(735	)		(2	)
General and administrative		25,143			21,998			3,145			14
Depreciation		273			287			(14	)		(5	)
Total expenses		64,747			62,351			2,396			4
Other income (expense), net		(9,571	)		(13,223	)		3,652			28
Loss before taxes on income		(73,556	)		(73,353	)		(203	)		(0	)
Benefit from (provision for) taxes on income		1			653			(652	)	**
Net loss	$	(73,555	)	$	(72,700	)	$	(855	)		(1	)

** Percentage not meaningful

Revenue

License and milestone revenue represented approximately 99% and 36% of total revenue for the three months ended June 30, 2022 and 2021, respectively, and consisted of the recognition of Kyowa Kirin deferred revenue. License and milestone revenue decreased by 6%, primarily due to the Company reaching the end of the performance obligation of the Kyowa Kirin Agreement during the current period.

Other revenue decreased in the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to a decrease in reimbursements of expenses from Kyowa Kirin for manufacturing and non-clinical study expenses incurred.

Expenses

The following table summarizes our expenses, including as a percentage of total expenses, for the three months ended June 30:


	2022		% of Total Expenses			2021		% of Total Expenses
	(in thousands, except for percentage data)
Research and development	$	39,331		60	%	$	40,066		64	%
General and administrative		25,143		39	%		21,998		35	%
Depreciation		273		1	%		287		1	%
Total expenses	$	64,747				$	62,351

Research and Development Expenses

Research and development expenses decreased by $0.7 million, or 2%, for the three months ended June 30, 2022, remained consistent when compared to the three months ended June 30, 2021.

Research and development expenses, as a percentage of total expenses, was 60% and 64% for the three months ended June 30, 2022 and 2021, respectively. The decrease of 4% was due to the proportionately larger increase in general and administrative expenses, compared to research and development expenses.

General and Administrative Expenses

General and administrative expenses increased by $3.1 million, or 14%, for the three months ended June 30, 2022, compared to the three months ended June 30, 2021. The increase was primarily due to rent expense related to the new headquarters building lease that commenced in December 2021.

General and administrative expenses, as a percentage of total expenses, was 39% and 35%, for the three months ended June 30, 2022 and 2021, respectively. The increase of 4% was due to the proportionately larger increase in general and administrative expenses, compared to research and development expenses.

Other Income (Expense), Net

Other income (expense), net decreased by $3.7 million for the three months ended June 30, 2022, compared to the three months ended June 30, 2021. The decrease was primarily due to a decrease in effective interest rate in non-cash interest expense on liability related to the sale of future royalties and a decrease of interest expense attributable to the payable to AbbVie under to the Reacquisition Agreement, which was fully satisfied in 2021.

Benefit from (Provision for) Taxes on Income

Benefit from taxes on income decreased by $0.6 million for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to interest earned on tax benefit in 2021 resulting from CARES Act.

Results of Operations

Comparison of the Six Months Ended June 30, 2022 and 2021 (unaudited)

The following table sets forth our results of operations for the six months ended June 30:


	2022			2021			Change $			Change %
	(in thousands, except for percentage data)
Collaboration revenue
License and milestone	$	1,648		$	1,598		$	50			3
Other revenue		29			1,568			(1,539	)		(98	)
Total collaboration revenue		1,677			3,166			(1,489	)		(47	)
Expenses
Research and development		79,136			74,946			4,190			6
General and administrative		49,984			42,703			7,281			17
Depreciation		581			561			20			4
Total expenses		129,701			118,210			11,491			10
Other income (expense), net		(19,343	)		(25,780	)		6,437			25
Loss before taxes on income		(147,367	)		(140,824	)		(6,543	)		(5	)
Benefit from (provision for) taxes on income		(30	)		669			(699	)	**
Net loss	$	(147,397	)	$	(140,155	)	$	(7,242	)		(5	)

** Percentage not meaningful

Revenue

License and milestone revenue represented approximately 98% and 50% of total revenue for the six months ended June 30, 2022 and 2021, respectively, and consisted of the recognition of Kyowa Kirin deferred revenue.

License and milestone revenue increased by 3% during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to the achievement of a regulatory milestone in July 2021, variable consideration previously considered constrained, under the Kyowa Kirin Agreement.

Other revenue decreased in the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to a decrease in reimbursements of expenses from Kyowa Kirin for manufacturing and non-clinical study expenses incurred.

Expenses

The following table summarizes our expenses, including as a percentage of total expenses, for the six months ended June 30:


	2022		% of Total Expenses			2021		% of Total Expenses
	(in thousands, except for percentage data)
Research and development	$	79,136		60	%	$	74,946		63	%
General and administrative		49,984		39	%		42,703		36	%
Depreciation		581		1	%		561		1	%
Total expenses	$	129,701				$	118,210

Research and Development Expenses

Research and development expenses increased by $4.2 million, or 6% for the six months ended June 30, 2022, compared to the six months ended June 30, 2021. The increase was primarily due to increased personnel and personnel-related costs to support the product development activities.

Research and development expenses, as a percentage of total expenses, was 60% and 63% for the six months ended June 30, 2022 and 2021, respectively. The decrease of 3% was due to the proportionately larger increase in general and administrative expenses, compared to research and development expenses.

General and Administrative Expenses

General and administrative expenses increased by $7.3 million, or 17%, for the six months ended June 30, 2022, compared to the six months ended June 30, 2021. The increase was primarily due to rent expense related to the new headquarters building lease that commenced in December 2021.

General and administrative expenses, as a percentage of total expenses, was 39% and 36%, for the six months ended June 30, 2022 and 2021, respectively. The increase of 3% was due to the proportionately larger increase in general and administrative expenses, compared to research and development expenses.

Other Income (Expense), Net

Other income (expense), net decreased by $6.4 million for the six months ended June 30, 2022,compared to the six months ended June 30, 2021. The decrease was primarily due to a decrease in effective interest rate in non-cash interest expense on liability related to the sale of future royalties and a decrease of interest expense attributable to the payable to AbbVie under to the Reacquisition Agreement, which was fully satisfied in 2021.

We periodically reassess the expected royalty payments under the Development Agreement, and to the extent such payment is greater or less than the initial estimate, we adjust the amortization. Based on our review in the first quarter of 2022, we lowered our previous estimate of future sales for which royalties will be paid. Accordingly, we have prospectively adjusted and recognized lower non-cash interest expense for the six months ended June 30, 2022.

Benefit from (Provision for) Taxes on Income

For the six months ended June 30, 2022 compared to the six months ended June 30, 2021, taxes increased by $0.7 million, primarily related to benefit recognized in 2021 from interest earned on tax refunds related to CARES Act.

Liquidity and Capital Resources

Since our inception, we have funded our operations primarily through collaboration and license agreements, the sale of preferred and common stock, the sale of royalty interests, and secured loans. Through June 30, 2022, we have raised gross cash proceeds of $476.6 million through the sale of convertible preferred stock and $785.0 million from payments under license and collaboration agreements. We also obtained $1,222.1 million in net proceeds from our initial public offering, follow-on offerings, and the sale of our Class A common stock under the Purchase Agreement, and $299.0 million in net proceeds from the sale of future royalties under the Development Agreement. We have not generated any revenue from the sale of any products. As of June 30, 2022, we had available cash and cash equivalents of approximately $147.2 million. Our cash and cash equivalents are invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.

Cash Flows

The following table sets forth the primary sources and uses of cash for each of the six months ended June 30:


	2022			2021
	(in thousands)

Net cash (used in) provided by:
Operating activities	$	(107,307	)	$	(70,611	)
Investing activities		(336,532	)		(462	)
Financing activities		735			8,630
Net change in cash and cash equivalents	$	(443,104	)	$	(62,443	)

Operating Activities

Net cash used in operating activities was $107.3 million for the six months ended June 30, 2022, consisting primarily of a net loss of $147.4 million adjusted for non-cash items including stock-based compensation expense of $29.3 million, non-cash interest expense on liability related to sale of future royalty of $20.1 million, and a net decrease in operating assets and liabilities of $9.6 million. The significant items in the change in operating assets that impacted our use of cash in operations include a decrease of $5.7 million in accounts payable due to timing of payments, and a decrease of $5.1 million in direct research and other current and long-term liabilities, primarily due to annual bonus payments.

Net cash used in operating activities was $70.6 million for the six months ended June 30, 2021, consisting primarily of a net loss of $140.2 million adjusted for non-cash items including stock-based compensation expense of $27.9 million, non-cash interest expense on liability related to sale of future royalty of $22.4 million, depreciation, amortization of issuance costs, and imputed interest expense of $4.0 million, and a net increase in operating assets and liabilities of $15.2 million. The significant items in the change in operating assets that impacted our use of cash in operations include a decrease of $22.2 million in income tax receivable due to the receipt of a CARES Act refund and an increase of $3.6 million in accounts payable due to timing of payments, offset by an increase of $5.0 million in prepaid expense, other current assets, and other assets due to insurance premium paid and a decrease of $4.0 million in accrued direct research and other current and long-term liabilities primarily due to the change in timing of bonus payments from December to March of the following year, which began with the December 2020 payments being delayed to March 2021.

Investing Activities

Net cash used in investing activities was $336.5 million and $0.5 million for the six months ended June 30, 2022 and 2021 , respectively. The increase is due to the purchase of $334.0 million in marketable securities during the period.

Financing Activities

Net cash provided by financing activities was $0.7 million and $8.6 million for the six months ended June 30, 2022 and 2021, respectively, primarily consisting of stock options exercises.

Operating Capital Requirements

To date, we have not generated any revenue from product sales. We do not know when or whether we will generate any revenue from product sales. We do not expect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize one or more of our current or future product candidates. We anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products. We are subject to all the risks related to the development and commercialization of novel therapeutics, including those described under the heading “Risk Factors” included in our most recent Annual Report on Form 10-K, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. We continue to incur additional costs associated with operating as a public company. We anticipate that we will need substantial additional funding in connection with our continuing operations.

In October 2019, we entered into the 2019 Lease Agreement, relating to a new headquarter building lease of approximately 327,400 square feet of office and laboratory space located in Plano, Texas.

•

In December 2021, we obtained control of the building, and, accordingly, we recorded related right-of-use assets and the lease liabilities during the fourth quarter of 2021.

•

We have paused the tenant improvement activities for the new headquarter building and are attempting to sublease the building. At this point, we will not spend the earlier-planned $50 million in capital expenditures. If at a future date we determine to move into the building, capital expenditures will need to be incurred based on our occupancy requirements at that time.

•

The initial term of the lease is 16 years, with up to ten years of extension at our option. The annual base rent payment, which will begin in June 2022, will be determined based on the project cost, subject to an initial annual cap of approximately $13.3 million. Beginning in the third lease year, the base rent will increase 1.95% per annum each year. In addition to the annual base rent, we will pay for taxes, insurance, utilities, operating expenses, assessments under private covenants, maintenance and repairs, certain capital repairs and replacements, and building management fees.

In July 2021, Kyowa Kirin announced the submission of an NDA in Japan for bardoxolone for improvement of renal function in patients with Alport syndrome. We earned a $5.0 million milestone related to this event that was received and began to be recognized in the third quarter of 2021.

In December 2020, we closed a follow-on underwritten public offering of 2,000,000 shares of our Class A common stock for gross proceeds of $281.7 million. Net proceeds to us from the offering were approximately $277.5 million, after deducting underwriting discounts and commissions and offering expenses.

In June 2020, we closed on the Development Agreement and Purchase Agreement, each dated June 10, 2020, under which certain BXLS entities paid us an aggregate of $350.0 million in exchange for future royalties on bardoxolone and an aggregate of 340,793 shares of our Class A common stock at $146.72 per share.

Our longer term liquidity requirements will require us to raise additional capital, such as through additional equity, debt, or royalty financings or collaboration arrangements. Our future capital requirements will depend on many factors, including the receipt of milestones under our Kyowa Kirin Agreement and the timing of our expenditures related to clinical trials. We believe our existing cash and cash equivalents will be sufficient to enable us to fund our operations through the fourth quarter of 2024. However, we anticipate opportunistically raising additional capital before that time through equity offerings, collaboration or license agreements, additional debt financings, or royalty financings in order to maintain adequate capital reserves. In addition, we may choose to raise additional capital at any time for the further development of our existing product candidates and may also need to raise additional funds sooner to pursue other development activities related to additional product candidates. Decisions about the timing or nature of any financing will be based on, among other things, our perception of our liquidity and of the market opportunity to raise equity, debt, or royalty financing. Additional securities may include common stock, preferred stock, or debt securities. We may explore strategic collaborations or license arrangements for any of our product candidates. If we do explore any arrangements, there can be no assurance that any agreement will be reached, and we may determine to cease exploring a potential transaction for any or all of the assets at any time. If an agreement is reached, there can be no assurance that any such transaction would provide us with a material amount of additional capital resources.

Until we can generate a sufficient amount of revenue from our product candidates, if ever, we expect to finance future cash needs through public or private equity or debt offerings, loans, royalty financings, and collaboration or license transactions. Recent and continued volatility in global financial markets may reduce our ability to access capital, which could negatively affect our liquidity. Additional capital may not be available on reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back, or discontinue the development or commercialization of one or more of our product candidates. If we raise additional funds through the issuance of additional equity or debt securities, it could result in dilution to our existing stockholders or increased fixed payment obligations, and any such securities may have rights senior to those of our common stock. If we incur indebtedness or obtain royalty financing, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell, or license intellectual property rights, and other operating restrictions that could adversely affect our ability to conduct our business, and any such debt or royalty financing could be secured by some or all of our assets. Any of these events could significantly harm our business, financial condition, and prospects. For a description of the numerous risks and uncertainties associated with product development and raising additional capital, see “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Our forecast of the period through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Our future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to:

•

the scope, rate of progress, results, and cost of our clinical trials, preclinical testing, and other activities related to the development of our product candidates;

•

the number and characteristics of product candidates that we pursue;

•

the costs of development efforts for our product candidates that are not subject to reimbursement from our collaborators;

•

the costs necessary to obtain regulatory approvals, if any, for our product candidates in the United States and other jurisdictions, and the costs of post-marketing studies that could be required by regulatory authorities in jurisdictions where approval is obtained;

•

the continuation of our existing collaboration with Kyowa Kirin and entry into new collaborations and the receipt of any collaboration payments;

•

the time and unreimbursed costs necessary to commercialize products in territories in which our product candidates are approved for sale;

•

the revenue from any future sales of our products or for which we are entitled to a profit share, royalties, and milestones;

•

the level of reimbursement or third-party payor pricing available to our products;

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the costs of obtaining third-party commercial supplies of our products, if any, manufactured in accordance with regulatory requirements;

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the costs associated with any potential loss or corruption of our information or data in a cyberattack on our computer systems or those of our suppliers, vendors, or collaborators who store or transmit our data;

•

the costs associated with being a public company;

•

any additional costs we incur, or delays in clinical trials we experience, associated with the COVID-19 pandemic; and

•

the costs we incur in the filing, prosecution, maintenance, and defense of our patent portfolio and other intellectual property rights.

If we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, financial condition, and results of operations could be materially adversely affected.

Contractual Obligations and Commitments

We have various contractual obligations and other commitments that require payments at certain specified periods. The following table summarizes our contractual obligations and commitments as of June 30, 2022 (unaudited):


	Payments due by period
	Less than 1 year		1 to 3 years		4 to 5 years		6 years and beyond		Total
	(unaudited, in thousands)
Operating lease obligations(1)	$	15,607	$	16,522	$	27,965	$	176,152	$	236,246
Total contractual obligations	$	15,607	$	16,522	$	27,965	$	176,152	$	236,246

(1) Above table assumes one year rent abatement is applied beginning in June 2023 following FDA approval of omaveloxolone.

The terms of the Development Agreement require us to pay potential future royalty payments based on product development success. The above table excludes such obligations as the amount and timing of such obligations are unknown or uncertain, which are further described in Note 4, Liability Related to Sale of Future Royalties, to Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.

Clinical Trials

As of June 30, 2022, we have several on-going clinical trials in various stages. Under agreements with various CROs and clinical trial sites, we incur expenses related to clinical trials of our product candidates and potential other clinical candidates. The timing and amounts of these disbursements are contingent upon the achievement of certain milestones, patient enrollment, and services rendered or as expenses are incurred by the CROs or clinical trial sites. Therefore, we cannot estimate the potential timing and amount of these payments, and they have been excluded from the table above.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, accrued research and development expenses, income taxes, and stock-based compensation. We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are described in Note 2 of Part I, Item 1 of this Quarterly Report on Form 10-Q and in Part I, Item 7, “Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K. There have been no changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31, 2021.

Off-Balance Sheet Arrangements

Since our inception, we have not had any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements, and we have not engaged in any other off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, please see Note 2, Summary of Significant Accounting Policies, of Notes to Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks in the ordinary course of our business. These market risks are principally limited to interest rate fluctuations. We had cash and cash equivalents of $147.2 million and marketable debt securities of $334.3 million at June 30, 2022, primarily invested in U.S. government treasuries. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general U.S. interest rates, particularly if our investments are in short-term securities. The primary objective of our investment activities is to preserve principal and liquidity while maximizing income without significantly increasing risk. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of our investment portfolio, we do not believe an immediate and hypothetical increase of 100 basis points in interest rates would have a material effect on the fair market value of our portfolio, and accordingly we do not expect a sudden change in market interest rates to affect materially our operating results or cash flows.

We contract with research, development, and manufacturing organizations and investigational sites globally. Generally, these contracts are denominated in United States dollars. However, we may be subject to fluctuations in foreign currency rates in connection with agreements not denominated in United States dollars. We do not hedge our foreign currency exchange rate risk.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, during the six months ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

For a discussion of material pending legal proceedings, please read Note 10, Commitments and Contingencies – Litigation, to our condensed consolidated financial statements included in Part I, Item I, “Financial Statements (Unaudited),” of this Quarterly Report on Form 10-Q, which is incorporated into this item by reference.

Item 1A. Risk Factors.

In addition to other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors and other cautionary statements described under the heading “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2021, which could materially affect our businesses, financial condition, or future results. Additional risks and uncertainties currently unknown to us, or that we currently deem to be immaterial, also may materially adversely affect our business, financial condition, or future results. There have been no material changes in our risk factors from those described in the Annual Report on Form 10-K for the year ended December 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.


Exhibit Number		Description

3.1		Thirteenth Amended and Restated Certificate of Incorporation, dated May 11, 2016 (incorporated by reference to Exhibit 3.7 to the Company’s Form S-1 (File No. 333-208843), filed with the SEC on May 16, 2016).

3.2		Second Amended and Restated Bylaws, dated as of December 7, 2016 (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K (File No. 001-37785), filed with the SEC on December 7, 2016).
10.1#		Amendment No. 1 to Exclusive License Agreement, dated as of April 5, 2022, by and between the KU Center for Technology Commercialization, Inc. and the Registrant, dated as of, as amended.

10.2*#		Seventh Supplement to Exclusive License and Supply Agreement, dated as of February 28, 2022 between Reata Pharmaceuticals, Inc. and Kyowa Hakko Kirin Co., Ltd.
10.3*		Indemnification Agreement by and between the Company and Steven W. Ryder, dated as of July 11, 2022. (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K (File No. 001-37785), filed with the SEC on July 11, 2022).

31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*		Inline XBRL Instance Document - The cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith.

** Furnished herewith.

# Information in this exhibit identified by three asterisks [***] is confidential and has been omitted pursuant to

Item 601(b)(10)(iv) of Regulation S-K because it is not material and is the type of information that the Company customarily treats as private or confidential. An unredacted copy of this exhibit will be furnished to the Securities and Exchange Commission on a supplemental basis upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Date: August 8, 2022	REATA PHARMACEUTICALS, INC.

	By:	/s/ J. Warren Huff
	Name:	J. Warren Huff
	Title:	Chief Executive Officer


	By:		/s/ Manmeet S. Soni
	Name:		Manmeet S. Soni
	Title:		Chief Operating Officer, Chief Financial Officer, and President