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

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

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

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.

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 ~~November 2, 2022,~~May 5, 2023, the registrant had ~~31,730,307~~33,036,126 shares of Class A common stock, $0.001 par value per share, and ~~4,913,348~~4,515,316 shares of Class B common stock, $0.001 par value per share, outstanding.

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:

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.

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.


	September 30, 2022			December 31, 2021			March 31, 2023			December 31, 2022
	(unaudited)						(unaudited)
Assets
Cash and cash equivalents	$	31,918		$	590,258		$	84,940		$	42,312
Marketable debt securities		403,957			—			236,019			345,202
Prepaid expenses and other current assets		9,229			6,217			11,583			10,256
Total current assets		445,104			596,475			332,542			397,770
Property and equipment, net		11,263			11,604			11,060			11,179
Operating lease right-of-use-assets		127,135			126,777			103,807			105,258
Inventory, noncurrent								5,713			—
Other assets		142			160			460			284
Total assets	$	583,644		$	735,016		$	453,582		$	514,491
Liabilities and stockholders’ equity
Accounts payable	$	7,518		$	13,505		$	14,448		$	18,706
Accrued direct research liabilities		18,029			14,249			19,445			13,836
Other current liabilities		19,910			21,450			17,499			24,267
Operating lease liabilities, current		5,254			3,142			3,206			2,151
Deferred revenue		—			1,648
Total current liabilities		50,711			53,994			54,598			58,960
Other long-term liabilities		5			—
Operating lease liabilities, noncurrent		135,459			132,891			114,727			117,313
Liability related to sale of future royalties, net		392,953			362,142			414,930			403,913
Total noncurrent liabilities		528,417			495,033			529,657			521,226
Commitments and contingencies
Stockholders’ equity:
Common stock A, $0.001 par value: 500,000,000 shares authorized; issued and outstanding – 31,705,257 and 31,478,197 at September 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 September 30, 2022 and December 31, 2021, respectively		5			5
Common stock A, $0.001 par value: 500,000,000 shares authorized; issued and outstanding – 33,010,817 and 31,762,052 at March 31, 2023 and December 31, 2022, respectively								33			32
Common stock B, $0.001 par value: 150,000,000 shares authorized; issued and outstanding – 4,516,934 and 4,913,348 at March 31, 2023 and December 31, 2022, respectively								5			5
Additional paid-in capital		1,486,509			1,441,584			1,552,938			1,501,800
Accumulated deficit		(1,482,030	)		(1,255,631	)		(1,683,649	)		(1,567,532	)
Total stockholders’ equity		4,516			185,989			(130,673	)		(65,695	)
Total liabilities and stockholders’ equity	$	583,644		$	735,016		$	453,582		$	514,491


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30						September 30						March 31
	2022			2021			2022			2021			2023			2022
Collaboration revenue
License and milestone	$	—		$	5,529		$	1,648		$	7,127		$	—		$	893
Other revenue		540			1,862			568			3,430			195			21
Total collaboration revenue		540			7,391			2,216			10,557			195			914
Expenses
Operating cost and expenses
Research and development		43,485			39,430			122,620			114,377			55,477			39,804
General and administrative		27,270			25,736			77,254			68,440
Selling, general and administrative														54,885			24,841
Depreciation		272			320			853			880			288			308
Total expenses		71,027			65,486			200,727			183,697
Total operating cost and expenses														110,650			64,953
Other income (expense), net		(8,515	)		(13,751	)		(27,858	)		(39,530	)		(5,662	)		(9,772	)
Loss before taxes on income		(79,002	)		(71,846	)		(226,369	)		(212,670	)
Loss from operations														(116,117	)		(73,811	)
Benefit from (provision for) taxes on income		—			—			(30	)		669			—			(31	)
Net loss	$	(79,002	)	$	(71,846	)	$	(226,399	)	$	(212,001	)	$	(116,117	)	$	(73,842	)
Net loss per share—basic and diluted	$	(2.16	)	$	(1.97	)	$	(6.21	)	$	(5.84	)	$	(3.14	)	$	(2.03	)
Weighted-average number of common shares used in net loss per share basic and diluted		36,536,919			36,387,560			36,472,903			36,297,766			36,948,063			36,412,621


	Three Months Ended September 30, 2022																	Three Months Ended March 31, 2023
	Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’			Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital		Deficit			Equity			Shares		Amount		Shares			Amount		Capital		Deficit			Equity
Balance at June 30, 2022		31,572,894	$	32		4,913,348		$	5	$	1,471,627	$	(1,403,028	)	$	68,636
Balance at December 31, 2022																			31,762,052	$	32		4,913,348		$	5	$	1,501,800	$	(1,567,532	)	$	(65,695	)
Net loss		—		—		—			—		—		(79,002	)		(79,002	)		—		—		—			—		—		(116,117	)		(116,117	)
Compensation expense related to stock options		—		—		—			—		14,446		—			14,446
Compensation expense related to stock-based compensation																			—		—		—			—		38,057		—			38,057
Exercise of options		955		—		17,912			—		436		—			436			519,224		1					—		13,080		—			13,081
Issuance of common stock upon vesting of restricted stock units		113,496		—		—			—		—		—			—			333,127				—			—		1		—			1
Conversion of common stock Class B to Class A		17,912		—		(17,912	)		—		—		—			—			396,414		—		(396,414	)		—		—		—			—
Balance at September 30, 2022		31,705,257	$	32		4,913,348		$	5	$	1,486,509	$	(1,482,030	)	$	4,516
Balance at March 31, 2023																			33,010,817	$	33		4,516,934		$	5	$	1,552,938	$	(1,683,649	)	$	(130,673	)


	Three Months Ended September 30, 2021																	Three Months Ended March 31, 2022
	Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’			Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital		Deficit			Equity			Shares		Amount		Shares			Amount		Capital		Deficit			Equity
Balance at June 30, 2021		31,454,329	$	31		4,924,479		$	5	$	1,412,193	$	(1,098,400	)	$	313,829
Balance at December 31, 2021																			31,478,197	$	31		4,919,249		$	5	$	1,441,584	$	(1,255,631	)	$	185,989
Net loss		—		—		—			—		—		(71,846	)		(71,846	)		—		—		—			—		—		(73,842	)		(73,842	)
Compensation expense related to stock options		—		—		—			—		13,657		—			13,657
Compensation expense related to stock-based compensation																			—		—		—			—		15,444		—			15,444
Exercise of options		—		—		10,302			—		337		—			337			—		—		9,375			—		194		—			194
Issuance of common stock upon vesting of restricted stock units						2,179			—		—		—			—			35,107				2,835			—		—		—			—
Conversion of common stock Class B to Class A		17,711		—		(17,711	)		—		—		—			—			12,210		—		(12,210	)		—		—		—			—
Balance at September 30, 2021		31,472,040	$	31		4,919,249		$	5	$	1,426,187	$	(1,170,246	)	$	255,977
Balance at March 31, 2022																			31,525,514	$	31		4,919,249		$	5	$	1,457,222	$	(1,329,473	)	$	127,785


	Nine Months Ended						Three Months Ended
	September 30						March 31
	2022			2021			2023			2022
Operating activities
Net loss	$	(226,399	)	$	(212,001	)	$	(116,117	)	$	(73,842	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		853			880			288			308
Amortization of debt issuance costs and imputed interest		—			5,322
Non-cash interest expense on liability related to sale of future royalty		30,812			34,312			11,017			9,871
Stock-based compensation expense		43,754			41,580			38,057			15,444
Amortization of discount (premium) on marketable debt securities		(1,190	)		—			(1,954	)		—
Changes in operating assets and liabilities:
Income tax receivable and payable		—			22,228			9			—
Prepaid expenses, other current assets and other assets		(2,978	)		(1,471	)		(1,334	)		877
Inventory								(5,713	)		—
Accounts payable		(6,215	)		(3,117	)		(4,355	)		(4,525	)
Accrued direct research, other current and long-term liabilities		2,512			1,625
Accrued expenses, other current and long-term liabilities								(1,268	)		(8,914	)
Operating lease obligations		6,658			—			(80	)		3,489
Deferred revenue		(1,648	)		(2,127	)		—			(893	)
Net cash used in operating activities		(153,841	)		(112,769	)		(81,449	)		(58,185	)
Investing activities
Purchases of property and equipment		(2,903	)		(1,136	)		(141	)		(288	)
Purchases of marketable securities		(477,767	)		—			(63,864	)		—
Maturity from marketable securities		75,000						175,000
Net cash used in investing activities		(405,670	)		(1,136	)
Net cash provided by (used in) investing activities								110,995			(288	)
Financing activities
Exercise of options		1,171			8,967			13,081			194
Issuance of common stock								1			—
Net cash provided by financing activities		1,171			8,967			13,082			194
Net decrease in cash and cash equivalents		(558,340	)		(104,938	)
Net increase (decrease) in cash and cash equivalents								42,628			(58,279	)
Cash and cash equivalents at beginning of year		590,258			818,150			42,312			590,258
Cash and cash equivalents at end of period	$	31,918		$	713,212		$	84,940		$	531,979
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations	$	4,885		$	—		$	—		$	4,885
Purchases of equipment in accounts payable, accrued direct research, other current, and long-term liabilities	$	190		$	4,239
Purchases of equipment in accounts payable, accrued expenses, other current, and long-term liabilities							$	106		$	2,258

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 ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022.~~2023. The consolidated balance sheet at December 31, ~~2021,~~2022, 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.

New Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed below, the Company does not believe that the adoption of recently issued standards have or may have a material impact on its condensed consolidated financial statements and disclosures.

Summary of Significant Accounting Policies

The significant accounting policies used in the preparation of these condensed consolidated financial statements for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 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.~~2022, with the exception of the following:

~~Investments in Marketable Securities and Cash Equivalents~~Inventory

~~The Company invests excess cash balances~~We capitalize inventory costs related to products to be sold in ~~marketable debt securities~~the ordinary course of business. We make a determination of capitalizing inventory costs for a product based on, among other factors, status of regulatory approval, information regarding safety, efficacy and ~~classifies its investments~~expectations relating to commercial sales and recoverability of costs. Pre-launch inventory is held as ~~held-to-maturity on facts~~an asset when there is a high probability of regulatory approval for the product and ~~circumstances present~~when there are probable future economic profits. Inventory may consist of raw materials, work in process and finished goods. We began capitalizing inventory related to SKYCLARYS in the quarter ended March 31, 2023, as we received approval of SKYCLARYS in February 2023, and the related costs were expected to be recoverable through the commercialization of SKYCLARYS. Prior to the start of capitalizing inventory, costs for commercially saleable product and materials of $39.2 million were incurred and included in research and development expenses. As a result, cost of product revenues related to SKYCLARYS will initially reflect a lower average per unit cost of materials over the next 35-40 months as previously expensed inventory is utilized for commercial production and sold to customers.

Inventories are valued under the specific identification method and are stated at the ~~time~~lower of cost or net realizable value. We measure inventory based on lot-based costing where inventory is valued at the ~~Company purchased~~purchase price for the ~~securities. At~~specific lot. We assess recoverability of inventory 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.reporting period to determine any write down to net realizable value resulting from excess or obsolete inventories.

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 September 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 nine months ended September 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 ~~September 30, 2022,~~March 31, 2023, 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.~~ 9

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.~~

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

2022. 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 was recognized over the remaining performance obligation period. Under the Kyowa Kirin Agreement, we will not recognize any deferred revenue subsequent to June 30, 2022.

9In May 2023, Kyowa Kirin reported results from the AYAME study, a Phase 3 trial which was conducted in Japan studying the safety and efficacy of bardoxolone in patients with diabetic kidney disease. Based on the results of AYAME and its potential regulatory impact, we and Kyowa Kirin have decided to discontinue our bardoxolone CKD programs, including the FALCON and EAGLE clinical trials. See Note 13, Subsequent Events, to our condensed consolidated financial statements for further details.

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 was subsequently 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 $1.8~~ ~~million during the three months ended September 30, 2021, and $5.3~~ ~~million during the nine months ended September 30, 2021.~~ As of ~~September 30, 2022,~~December 31, 2021, the Company has fully satisfied its payable to AbbVie, therefore no interest expense was recognized ~~for the three and nine months ended September 30, 2022.~~thereafter.

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.~~target.

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~~At inception, the effective interest rate under the Development Agreement, including transaction costs, iswas approximately 13.8%. During the first quarter of 2022, 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 ~~September 30, 2022.~~March 31, 2023.

The following table shows the activity within the liability related to sale of future royalties for the ~~nine~~three months ended ~~September 30, 2022:~~March 31, 2023:

Liability Related to Sale of Future Royalties

(in thousands)

Balance at December 31, 2021
$
362,928

Non-cash interest expense recognized

30,762

Balance at September 30, 2022

393,690

Less: Unamortized transaction cost

(737
)
Carrying value at September 30, 2022
$
392,953


	Liability Related to Sale of Future Royalties
	(in thousands)
Balance at December 31, 2022	$	404,634
Non-cash interest expense recognized		11,000
Balance at March 31, 2023		415,634
Less: Unamortized transaction cost		(704	)
Carrying value at March 31, 2023	$	414,930

6. Marketable Debt Securities

During the quarter ended ~~September 30, 2022,~~March 31, 2023, 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 ~~September 30, 2022:~~March 31, 2023:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value (1)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value (1)
Marketable debt securities:
U.S. treasury securities		403,957		2		(1,029	)		402,930		236,019		17		(27	)		236,009
Total	$	403,957	$	2	$	(1,029	)	$	402,930	$	236,019	$	17	$	(27	)	$	236,009

(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~~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.

6.7. Other Income (Expense), Net


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30						September 30						March 31
	2022			2021			2022			2021			2023			2022
	(in thousands)												(in thousands)
Other income (expense), net
Investment income	$	2,211		$	38		$	3,129		$	130		$	3,435		$	132
Interest expense		—			(1,835	)		—			(5,322	)
Non-cash interest expense on liability related to sale of future royalty		(10,664	)		(11,958	)		(30,812	)		(34,312	)		(11,017	)		(9,871	)
Other income (expense)		(62	)		4			(175	)		(26	)		1,920			(33	)
Total other income (expense), net	$	(8,515	)	$	(13,751	)	$	(27,858	)	$	(39,530	)	$	(5,662	)	$	(9,772	)

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

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

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) consists primarily of gains and losses on foreign currency ~~exchange.~~exchange, sales of assets, lease termination and employee retention credit.

In the three months ended March 31, 2023, other income included $2.0 million, related to the employee retention credit (ERC) under the CARES Act.

7.8. 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 ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the Company paid $~~6.2~~3.9 million for amounts included in the measurement of lease liabilities. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, the Company recorded total rent expense of $~~4.4~~4.3 million and $~~13.0~~ ~~million, respectively. During the three and nine months ended September 30, 2021, the Company recorded operating lease expense of $0.8~~ ~~million and $2.4~~4.3 million, respectively.

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

As of September 30,

2022

2021

Weighted-average remaining lease term (in years)

15.3

1.0

Weighted-average discount rate

6.5
%

8.1
%


	As of March 31,
	2023			2022
Weighted-average remaining lease term (in years)		15.0			15.6
Weighted-average discount rate		6.5	%		6.5	%

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


	As of September 30, 2022			As of March 31, 2023
	(in thousands)			(in thousands)
2022 (remaining three months)	$	4,323
2023 (1)		10,638
2024		7,427
2023 (remaining nine months)				$	5,835
2024 (1)					6,457
2025		13,737			11,777
2026		14,005			12,007
2027					12,241
Thereafter		182,044			143,829
Total lease payments (1)		232,174			192,146
Less: Imputed interest		(91,461	)		(74,213	)
Present value of lease liabilities	$	140,713		$	117,933

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

8.9. Income Taxes

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


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30						September 30						March 31
	2022			2021			2022			2021			2023			2022
	(in thousands, except for percentage data)												(in thousands, except for percentage data)
Benefit from (provision for) taxes on income	$	—		$	—		$	(30	)	$	669		$	—		$	(31	)
Effective income tax rate		0.0	%		0.0	%		0.0	%		0.3	%		0.0	%		0.0	%

The Company’s effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, 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 ~~September 30, 2022,~~March 31, 2023, 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~~In 2022, our stockholders approved the Reata Pharmaceuticals, Inc. 2022 Employee Stock Purchase Plan (the "ESPP"), pursuant to which 500,000 shares of common stock were authorized for issuance. Under the ESPP, each offering period is twelve months, with two six-month purchase periods. At the end of each purchase period the employees may purchase shares of common stock through payroll deductions made over the term of the purchase period. The per-share purchase price at the end of each purchase period is equal to the lesser of 85% of the closing price of the Company’s common stock at the beginning of the offering period or the purchase date. As of March 31, 2023, the Company has not issued any common stock in relation to the ESPP. The Company recorded approximately $0.2 million in compensation expense related to the ESPP during the three months ended March 31, 2023.

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


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30				September 30				March 31
	2022		2021		2022		2021		2023		2022
	(in thousands)								(in thousands)
Research and development	$	6,684	$	5,403	$	20,635	$	17,474	$	14,270	$	7,606
General and administrative		7,762		8,254		23,119		24,106
Selling, general and administrative										23,787		7,838
Total stock compensation expense	$	14,446	$	13,657	$	43,754	$	41,580	$	38,057	$	15,444

Restricted Stock Units (RSUs)

The following table summarizes ~~RSU activity~~RSUs as of ~~September 30, 2022,~~March 31, 2023, and changes during the three months ended March 31, 2023, under the Second Amended and Restated Long Term Incentive Plan (LTIP Plan):


	Number of RSUs			Weighted-Average Grant Date Fair Value		Number of RSUs			Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2022		809,145		$	66.91
Outstanding at January 1, 2023							1,151,656		$	45.45
Granted		767,325			27.33		453,049			40.03
Vested ~~(a)~~		(185,895	)		49.63		(352,042	)		34.64
Forfeited		(210,574	)		54.85		(13,113	)		50.56
Outstanding at September 30, 2022		1,180,001		$	46.02
Outstanding at March 31, 2023							1,239,550		$	46.48

~~(a) Per the terms of award agreements and elections, the issuance of common stock may be deferred for certain restricted stock equity awards that vest during the period.~~

As of ~~September 30, 2022,~~March 31, 2023, total unrecognized compensation expense related to RSU and performance-based RSU awards that were deemed probable of vesting was approximately $~~32.4~~41.2 million, which excludes ~~248,500~~36,500 shares of unvested performance-based RSUs that were deemed not probable of vesting totaling unrecognized stock-based compensation expense of $~~16.5~~4.4 million.

Stock Options

The following table summarizes stock option activity as of ~~September 30, 2022,~~March 31, 2023, and changes during the three months ended March 31, 2023, under the LTIP Plan and standalone option agreements:


	Number of Options			Weighted- Average Price		Number of Options			Weighted- Average Price
Outstanding at January 1, 2022		4,743,180		$	86.06
Outstanding at January 1, 2023							6,009,199		$	65.92
Granted		1,871,574			27.53		1,784,222			37.69
Exercised		(51,227	)		22.95		(519,224	)		25.21
Forfeited		(410,094	)		97.75		(248,260	)		188.95
Expired		(150,470	)		133.61		(44,033	)		111.59
Outstanding at September 30, 2022		6,002,963		$	66.36
Exercisable at September 30, 2022		3,264,656		$	60.10
Outstanding at March 31, 2023							6,981,904		$	56.57
Exercisable at March 31, 2023							3,376,690		$	64.37

As of ~~September 30, 2022,~~March 31, 2023, total unrecognized compensation expense related to stock options and performance- based stock options that were deemed probable of vesting was approximately $~~64.3~~92.1 million, which excludes ~~947,450~~172,500 shares of unvested performance-based stock options that were deemed not probable of vesting totaling unrecognized stock-based compensation expense of $~~54.2~~13.2 million.

The total intrinsic value of all outstanding options and exercisable options as of ~~September 30, 2022~~March 31, 2023 was $~~6.6~~313.6 million and $~~6.5~~141.1 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 ~~7,182,964~~8,221,454 and ~~4,705,515~~6,878,671 shares as of ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

~~11.~~12. 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 parties have agreed to a stipulation of compromise and settlement, which is subject to approval by the Court of Chancery. At September 30, 2022, the Company recorded a liability for the agreed amount of plaintiff’s attorneys’ fees and expenses, which has no material impact on the Company.

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 ~~September 30, 2022.~~March 31, 2023.

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.

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,~~serious or life-threatening diseases with few or no approved ~~therapies.~~therapies and unmet need. Our ~~lead programs~~first product, SKYCLARYS®(omaveloxolone), is the first and only drug approved by the U.S. Food and Drug Administration (FDA) for the treatment of Friedreich's ataxia (FA) in adults and adolescentsaged 16 years and older. We have submitted a Marketing Authorization Application (MAA) for omaveloxolone for the treatment of FA to the European Medicines Agency (EMA) in Europe and the application is under review. We are ~~omaveloxolone in Friedreich’s ataxia and bardoxolone in rare forms of CKD. Both of our~~also developing cemdomespib (previously referred to as RTA 901), the lead product ~~candidates activate~~candidate from our Hsp90 modulator program, in neurological indications and Nrf2 activators for neurological diseases.

Omaveloxolone activates the transcription factor Nrf2 to normalize mitochondrial function, restore redox balance, and resolve ~~inflammation.~~inflammation, in nonclinical models. Because mitochondrial dysfunction, oxidative stress, and inflammation are features of many diseases, we believe ~~omaveloxolone and bardoxolone~~our Nrf2 activators have many potential clinical applications.

We possess exclusive, worldwide rights to develop, manufacture, and commercialize omaveloxolone and ~~bardoxolone, 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.~~Nrf2 activators. We are the exclusive licensee of ~~RTA 901~~cemdomespib and have worldwide commercial rights.

In May 2023, Kyowa Kirin reported results from the AYAME study, a Phase 3 trial which was conducted in Japan studying the safety and efficacy of bardoxolone in patients with diabetic kidney disease. Based on the results of AYAME and its potential regulatory impact, we and Kyowa Kirin have decided to discontinue our bardoxolone CKD programs, including the FALCON and EAGLE clinical trials. See Note 13, Subsequent Events, to our condensed consolidated financial statements for further details.

~~The U.S. Food~~In February 2023, we announced that the FDA approved SKYCLARYS, the first and ~~Drug Administration (FDA) has granted Fast Track Designation, Orphan Drug Designation, and Rare Pediatric Disease Designation to omaveloxolone~~only drug approved by the FDA for the treatment of ~~Friedreich’s ataxia.~~FA in adults and adolescents 16 years of age and older. FA is a rare, inherited neurodegenerative disorder that is typically diagnosed during adolescence. Patients with FA experience progressive loss of coordination, muscle weakness, and fatigue, which commonly progresses to motor incapacitation and wheelchair reliance by their teens or early twenties, and eventually death. FA affects approximately 5,000 diagnosed patients in the U.S.

We are evaluating strategies to support global label expansion for younger pediatric patients. In ~~March 2022,~~the second quarter of 2023, we plan to request a meeting with the FDA to discuss possible label expansion for younger pediatric patients who are not included in the approved label. A pediatric pharmacokinetic study evaluating safety, tolerability, and pharmacokinetic profile (PK) of omaveloxolone in FA patients is planned to begin in the fourth quarter of 2023.

We have completed ~~rolling submission~~the final stages of anSKYCLARYS drug product manufacturing and packaging. As previously reported, a process-related drug substance impurity above the reporting threshold was observed. This impurity is part of the omaveloxolone drug substance process chemistry that was previously at levels below the reporting threshold. An NDA supplement was submitted to the FDA to increase the drug substance specification for this impurity above the current specification. The approval of this supplement is required to release SKYCLARYs drug product to our specialty pharmacy. The FDA is reviewing the supplement as a Prior Approval Supplement under Priority Review with an approval target action date in mid-August. The FDA stated that the review of the supplement was prioritized and that the approval potentially should come earlier than the action date. We believe that the information provided in the NDA supplement, which was developed based upon FDA and international harmonized guidance, is sufficient to support the proposed change. Provided that there are no major review issues with the supplement, we believe that SKYCLARYS will be available through the specialty pharmacy no later than mid-August 2023.

We submitted an MAA for omaveloxolone for the treatment of patients with ~~Friedreich’s ataxia. In May~~FA to the EMA in the fourth quarter of 2022 and the ~~FDA accepted our NDA~~application is under review. We recently received the omaveloxolone MAA Day 120 List of Questions from the EMA. The EMA separates their questions into “major” and “other” categories. With respect to major questions on clinical efficacy, the EMA invited us to discuss the robustness of the efficacy results and suggested the discussion could include the impact of imbalances in baseline characteristics on the pivotal study results and extrapolation of the results to patients with advanced disease and patient groups not included in the pivotal trial. They also asked us to justify inclusion of the pes cavus population in the indication. With respect to major questions on clinical safety, the EMA asked us to discuss the similarities between Nrf2 activators with respect to chemical structure and safety and to discuss suitable contraindications and warnings for ~~filing~~cardiac, renal, diabetic and ~~granted Priority Review.~~

Inother conditions taking into account the populations studied. With respect to major questions on drug product quality, the EMA requested us to clarify the information on the potential for nitrosamine formation and to provide further information on active substance control strategies. We believe that we have the data and analyses necessary to address the requests of the EMA, and we plan to provide responses to the EMA in the third quarter of 2022, we completed a Mid-Cycle Communication Meeting with the FDA. 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. The FDA stated that it had not identified any new significant issues, but it continued to have concerns regarding the strength of the efficacy evidence. Following the meeting we submitted an updated Delayed-Start Analysis of the MOXIe Extension study using a March 2022 data cut-off (see “Results from March 2022 Data Cut-Off of Delayed-Start Analysis of the MOXIe Extension” below), a new Propensity-Matched Analysis of MOXIe Extension data using patient data from the Clinical Outcome Measures in Friedreich’s Ataxia Study (FA-COMS) as controls (see “Post Hoc Propensity-Matched Analysis of MOXIe Extension” below), and an analysis of the relevance of Nrf2, the target of omaveloxolone, to the pathophysiology of Friedreich’s ataxia (see “Mechanistic Validation of Nrf2 Target Biomarkers in Friedreich’s Ataxia” below). The FDA determined that these submissions were a major amendment to our NDA.2023.

As previously reported, 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 and updated data sets and analyses to the FDA explaining the issue and the negligible impact on the studies.

The FDA extended the PDUFA date by three months to provide time for a full review of the new data and analyses. The updated PDUFA date for the application is February 28, 2023. The FDA continues to review all these submissions.

review the analyses and data included in the recent NDA submissions. The FDA made no request for additional data or analyses but stated that additional data may be requested as reviews are ongoing. The FDA confirmed that no information requests were outstanding. The FDA reiterated that they do not currently plan to hold an advisory committee meeting.

The FDA stated that no issues related to risk management have been identified to date. During the meeting, the FDA indicated that post-marketing requirements and label review are ongoing. With respect to post-marketing requirements and commitments, FDA stated that if omaveloxolone is approved, they anticipate requiring a drug-drug interaction trial with CYP3A4 modulators, a thorough QT trial, and an evaluation of pregnancy outcomes. FDA stated that other post-marketing requirements and commitments may be considered depending on the findings of the review. With respect to label review, during the meeting we noted that the original proposed label language did not reflect the data and analyses included in the amendments to the NDA and that we have updated it in connection with the planned filing of our MAA in Europe later this year. We committed to submit the updated proposed label language to the NDA. The FDA indicated that post-marketing requirements and label comments will be communicated in early in 2023. See “~~Programs in Neurological Diseases – Omaveloxolone in Patients with Friedreich’s Ataxia – Regulatory Guidance and Regulatory Interactions in the U.S.” below.~~

Regarding our plans to file 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 and 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 recently completed a Pre-Submission meeting and plan to submit an MAA to the EMA for omaveloxolone this year.

~~RTA 901~~Cemdomespib for Neurological Indications, Including Diabetic Peripheral Neuropathic Pain

~~In the third quarter of 2022, we completed additional Phase 1 clinical pharmacology studies of RTA 901, including a drug-drug interaction study which demonstrated an acceptable profile.~~ We are ~~finalizing~~developing cemdomespib, a novel, once-daily, oral HSP90 modulator for patients with DPNP. We have finalized the design of a randomized, double-blind, placebo-controlled Phase 2 trial of ~~RTA 901~~cemdomespib in patients with diabetic peripheral neuropathic pain (DPNP) and ~~are re-evaluating the timing~~plan to start the ~~trial.~~trial in the third quarter of 2023. We are the exclusive licensee of cemdomespib and have worldwide commercial rights.

AYAME Trial for Bardoxolone ~~in Patients with~~ in Diabetic CKD ~~Caused~~Conducted by ~~Alport Syndrome~~Kyowa Kirin

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 recently completed a Type C meeting to discuss the program with the FDA. While we have not yet received minutes from the meeting, based on the preliminary comments and subsequent discussion during the meeting, the Division reiterated its concerns included in the CRL. The Division stated that we will need a new trial in patients with Alport syndrome to demonstrate a clinically meaningful effect on the rate of loss of kidney function or, alternatively, show an effect on clinical outcomes, and that the benefits outweigh the risks. It also stated that we will need to provide data demonstrating that the treatment effect accrues over time to support a claim that bardoxolone slows the loss of kidney function in patients with Alport syndrome, although these results do not need to be statistically significant. We are considering our next steps for the 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~~May 2023, Kyowa Kirin reported results from the EMA and submitted responses in the third quarter. We received the Rapporteurs Day-150 Joint Committee for Medicinal Products for Human Use (CHMP) and the Pharmacovigilance Risk Assessment Committee (PRAC) response assessment report which contains comments on our responses. The assessment includes two major objections that preclude the recommendation of marketing authorization, in addition to a list of other concerns that must be addressed. The first major objection pertains to the uncertainty of whether there are additional major and/or active plasma metabolites that require additional in vivo, in vitro, and human metabolite studies to evaluate the metabolism of bardoxolone methyl. The second major objection pertains to the uncertainties regarding clinical safety, including a potential negative effect on renal function associated with long-term bardoxolone treatment. We recently received the draft CHMP Day 180 list of outstanding issues which indicates that the MAA will not be

approvable based on major objections identified. We expect to receive the 180-day list of outstanding issues before year end and will determine next steps with the application after receipt of this final report.

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

~~We are currently enrolling patients in FALCON,~~AYAME study, a Phase 3 ~~international, multi-center, randomized, double-blind, placebo-controlled~~ trial which was conducted in Japan 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~~diabetic kidney disease. AYAME met the primary 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 605 patients are currently enrolled~~key secondary endpoints, and no significant safety issues were noted. However, there was no separation in the ~~trial.~~occurrence of ESRD events between the bardoxolone and placebo groups after three years of treatment.

Based on the results of AYAME and its potential regulatory impact, we and Kyowa Kirin have decided to discontinue our bardoxolone CKD programs, including the ongoing FALCON Phase 3 trial in patients with ADPKD and EAGLE open-label extension study in patients with Alport syndrome and ADPKD. We will be communicating these plans with regulators and our clinical trial sites immediately.

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

1~~NDA accepted~~SKYCLARYS® (omaveloxolone) is indicated for ~~filing~~the treatment of FA in ~~May~~adults and adolescents aged 16 years and older.

2MAA submitted in fourth quarter of 2022 ~~granted Priority Review,~~ and ~~assigned~~is currently under review.

3Plan to initiate a ~~PDUFA date~~Phase 2 trial of ~~November 30, 2022. In~~cemdomespib in patients with DPNP in the third quarter of ~~2022, we submitted additional data and analyses to the FDA, which was determined to be a major amendment to our NDA, and the FDA extended the PDUFA date to February 28,~~ 2023.

3On February 25, 2022, we received a CRL from the FDA. We recently completed a Type C meeting to discuss the program and we are considering our next steps for the Alport syndrome program. The 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 with topline data available in the first half of 2023.

5~~Based 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.~~

~~We are developing omaveloxolone~~In February 2023, the FDA approved SKYCLARYS for the treatment of ~~patients with Friedreich’s ataxia, an~~FA in adults and adolescents aged 16 years and older. FA is a rare, inherited ~~debilitating, and degenerative neuromuscular~~neurodegenerative disorder that is ~~usually~~typically diagnosed during adolescence and can ~~ultimately~~ lead to premature death. ~~In May 2022, the FDA accepted for filing our NDA~~We are seeking approval for omaveloxolone for the treatment of ~~patients with Friedreich’s ataxia~~FA in Europe and ~~granted Priority Review. The NDA is currently under review~~plan to seek approval in additional countries and regions outside the ~~FDA has assigned a PDUFA date of February 28, 2023.~~

U.S. Because mitochondrial dysfunction is a key feature of many neurological diseases, we believe ~~omaveloxolone~~Nrf2 activators 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~~cemdomespib for the treatment of neurological diseases. ~~RTA 901~~Cemdomespib 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~~Cemdomespib has demonstrated profound efficacy in a wide range of animal models of neurological disease, including diabetic neuropathy, neuroinflammation, and neuropathic pain. We ~~are finalizing~~have finalized the design of a randomized, double-blind, placebo-controlled Phase 2 trial of ~~RTA 901~~cemdomespib in patients with ~~diabetic peripheral neuropathic pain~~DPNP and ~~are re-evaluating the timing~~plan to start the ~~trial.~~trial in the third quarter of 2023.

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 with Friedreich’s ataxia are diagnosed in their teens and early twenties. Patients with Friedreich’s ataxia~~FA experience progressive loss of coordination, muscle weakness, and fatigue, that commonly ~~results in~~progresses to motor incapacitation and wheelchair reliance. Diagnosis of FA typically occurs by genetic testing, and most people with ~~patients requiring~~FA are diagnosed in their teens and early twenties. Patients with FA typically require a wheelchair in their ~~twenties. The~~twenties and the mean age of death for patients with ~~Friedreich’s ataxia~~FA is in the mid-thirties. Childhood-onset ~~Friedreich’s ataxia~~FA can occur as early as age five, is more common than ~~later-onset Friedreich’s ataxia,~~later onset FA, and normally involves more rapid disease progression. ~~Currently,~~Based on literature and proprietary research, we believe FA affects approximately 6,000 patients in the United States and 22,000 individuals globally. According to a recent insurance claim analysis, we estimate that there are ~~no approved therapies~~approximately 5,000 patients diagnosed with FA in the United States.

In February 2023, we announced FDA approval of our first product SKYCLARYS (omaveloxolone), the first drug indicated for the treatment of ~~Friedreich’s ataxia.~~FA in adults and adolescents 16 years of age and older. With this approval, the FDA granted a rare pediatric disease priority review voucher.

~~Part 2~~We are evaluating strategies to support global label expansion for younger pediatric patients. In the second quarter 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~~2023, we plan to request a meeting with the FDA to discuss possible label expansion for younger pediatric patients ~~with Friedreich’s ataxia at 11 trial sites~~who are not included in the ~~United States, Europe,~~approved label. A pediatric pharmacokinetic study evaluating safety, tolerability, and ~~Australia. MOXIe Part 2 was one~~pharmacokinetic profile (PK) of ~~the largest global, interventional trials ever completed~~omaveloxolone in ~~Friedreich’s ataxia. Patients were randomized one-to-one~~FA patients is planned 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 evaluatedbegin 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~~fourth quarter 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.2023.

~~Additionally, all secondary endpoints either favored~~Additional pediatric study plans will be finalized after receiving an opinion from EMA scientific advice (see Regulatory Interactions in Europe section) and FDA feedback.

We have agreed with the ~~omaveloxolone arm or were neutral. Patients~~FDA on ~~omaveloxolone experienced~~multiple post-marketing requirements. The first is to conduct a ~~nominal improvement~~clinical drug-drug interaction study to determine the effect of concomitant administration of a moderate CYP3A4 inducer on the pharmacokinetics of SKYCLARYS in healthy volunteers. Second, we have committed to conduct a thorough QT study to assess the risk of QT prolongation with SKYCLARYS. We plan to initiate these studies in the ~~Activities~~second half of ~~Daily Living (ADL) questionnaire, with all nine questions favoring~~2023. Third, we have committed to conduct a study to assess the ~~omaveloxolone arm. On average, ADL scores for patients~~concentration of SKYCLARYS in breast milk (milk only). Fourth, we have committed to conduct a global pregnancy and lactation surveillance program to collect prospective and retrospective data in women exposed to SKYCLARYS to assess risk of maternal and fetal/neonate complications. Finally, we have agreed to conduct additional non-clinical studies. We are 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 correlatedtrack with the ~~observed improvement in mFARS.~~agreed upon milestones.

~~Omaveloxolone was reported~~Beyond our post-marketing requirements, we will sponsor a voluntary, post-marketing, prospective, observational, multinational registry study of patients treated commercially with SKYCLARYS. The primary objective of the registry is 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~~evaluate the long-term safety of SKYCLARYS 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~~FA 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.

We ~~are relying on section 115~~have completed the final stages of SKYCLARYS drug product manufacturing and packaging. As previously reported, a process-related drug substance impurity above the reporting threshold was observed. This impurity is part of the ~~Food and Drug Administration Modernization Act (FDAMA 115) and~~omaveloxolone drug substance process chemistry that was previously at levels below 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 pathwaysreporting threshold. An NDA supplement was submitted to ~~demonstrate substantial evidence of efficacy for drug approval; either:~~

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.

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 confirmatory evidence they would consider~~increase the drug substance specification for this impurity above the current specification. The approval of this supplement is required to ~~support an NDA submission and approval.~~release SKYCLARYs drug product to our specialty pharmacy. The FDA ~~subsequently requested~~is reviewing the supplement as 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~~Prior Approval Supplement under Priority Review with an approval target action date 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.mid-August. 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 was planning to hold an advisory committee meeting to discuss the application and assigned a PDUFA date of November 30, 2022.

In the third quarter of 2022, we completed a Mid-Cycle Communication Meeting with the FDA. 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. The FDA stated that it had not identified any new significant issues, but it continued to have concerns regarding the strength of the efficacy evidence. Following the meeting we submitted an updated Delayed-Start Analysis of the MOXIe Extension study using a March 2022 data cut-off (see “Results from March 2022 Data Cut-Off of Delayed-Start Analysis of the MOXIe Extension” below), a new Propensity-Matched Analysis of MOXIe Extension data using patient data from the Clinical Outcome Measures in Friedreich’s Ataxia Study (FA-COMS) as controls (see “Post Hoc Propensity-Matched Analysis of MOXIe Extension” below), and an analysis of the relevance of Nrf2, the target of omaveloxolone, to the pathophysiology of Friedreich’s ataxia (see “Mechanistic

~~Validation of Nrf2 Target Biomarkers in Friedreich’s Ataxia” below). The FDA determined that these submissions were a major amendment to our NDA.~~

~~The FDA extended the PDUFA date by three months to provide time for a full~~ review of the ~~new data and analyses. The updated PDUFA date for the application is February 28, 2023. The FDA continues to review all these submissions.~~

We recently completed a Late-Cycle Meeting with the FDA. The purpose of the Late-Cycle Meeting is for the FDA to discuss any substantive issues identified, and the Division’s objectives for the remainder of the review. The meeting does not address the final regulatory decision for the NDA. While we have not received formal minutes from the FDA, in the preliminary agenda for, and during, the Late-Cycle Meeting, the FDA stated that they continue to review the analyses and data included in the recent NDA submissions. The FDA made no request for additional data or analyses but stated that additional data may be requested as reviews are ongoing. The FDA confirmed that no information requests were outstanding. The FDA reiterated that they do not currently plan to hold an advisory committee meeting.

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 thatsupplement 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 (LS) 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.

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.

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).

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.

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

In the third quarter we 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.

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).

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 (Submitted to FDA in the Third Quarter of 2022)~~

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)~~

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)~~

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)~~

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)~~

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 (Submitted to FDA in the Third Quarter of 2022)~~

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 ataxiaprioritized and that the ~~increase~~approval potentially should come earlier than the action date. We believe that the information provided in ~~Nrf2 activity~~the NDA supplement, which was developed based upon FDA and international harmonized guidance, is ~~associated~~sufficient to support the proposed change. Provided that there are no major review issues with ~~a therapeutic benefit in these patients.~~the supplement, we believe that SKYCLARYS will be available through the specialty pharmacy no later than mid-August 2023.

We submitted an MAA for omaveloxolone for the treatment of patients with FA to the EMA in the fourth quarter of 2022 and the application is under review. We recently received the omaveloxolone MAA Day 120 List of Questions from the EMA. The EMA separates their questions into “major” and “other” categories. With respect to major questions on clinical efficacy, the EMA invited us to discuss the robustness of the efficacy results and suggested the discussion could include the impact of imbalances in baseline characteristics on the pivotal study results and extrapolation of the results to patients with advanced disease and patient groups not included in the pivotal trial. They also asked us to justify inclusion of the pes cavus population in the indication. With respect to major questions on clinical safety, the EMA asked us to discuss the similarities between Nrf2 activators with respect to chemical structure and safety and to discuss suitable contraindications and warnings for cardiac, renal, diabetic and other conditions taking into account the populations studied. With respect to major questions on drug product quality, the EMA requested us to clarify the information on the potential for nitrosamine formation and to provide further information on active substance control strategies. We believe that we have the data and analyses necessary to address the requests of the EMA, and we plan to provide responses to the EMA in the third quarter of 2023.

Prior to submission of the MAA, we received a positive opinion from the Pediatric Committee on our Pediatric Investigation Plan, ~~with~~and, as agreed in this plan, we have submitted a ~~commitment to seek~~request for scientific advice ~~for~~seeking 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 nonclinicaldesign.

~~studies, including 2-year carcinogenicity study data, may be submitted after approval. We recently complete the Pre-Submission meeting~~Omaveloxolone and ~~plan to submit an MAA to the EMA~~Our Other Nrf2 Activators for ~~omaveloxolone this year.~~

~~Omaveloxolone is a promising platform molecule.~~ Because mitochondrial dysfunction is a key feature of many neurological and neuromuscular diseases, we believe ~~omaveloxolone~~Nrf2 activators 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~~our Nrf2 activators may be applicable to both rare diseases such as Huntington’s disease, progressive supranuclear palsy, frontotemporal dementia, primary progressive multiple sclerosis, and others, as well as non-rare diseases such as Parkinson’s disease, ~~frontotemporal dementia, Huntington’s disease, amyotrophic lateral sclerosis (ALS),~~ Alzheimer’s disease, epilepsy, and ~~epilepsy.~~others. 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,~~FA, amyotrophic lateral sclerosis (ALS), familial and sporadic Parkinson’s disease, and frontotemporal dementia. In clinical trials, improvements in neuromuscular function have been observed in FA patients ~~with Friedreich’s ataxia~~ treated with omaveloxolone as assessed by ~~mFARS,~~the modified Friedreich’s Ataxia Rating Scale, 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~~We have developed additional small molecule activators of Nrf2, including RTA 415 and RTA 417, which are currently in preclinical development. The non-clinical profiles of these to ~~treat a number~~molecules support advancement to clinical studies and have shown broad activity in non-clinical models of ~~neurological~~inflammation, autoimmune disease, and ~~neuromuscular diseases that~~neurodegeneration. Late Investigational New Drug (IND)-directed studies are currently ~~have few~~underway or ~~no effective therapies,~~planned, and we ~~plan to pursue~~anticipate IND filings in 2024 for both molecules. We are currently evaluating the impact of provisions of the Inflation Reduction Act (IRA) on our future development ofplans for omaveloxolone and our other Nrf2 ~~activators for one or more of these diseases.~~activators.

~~RTA 901~~Cemdomespib 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~~cemdomespib 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~~adverse effects 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~~cemdomespib administered orally once-daily rescued ~~existing~~compromised nerve function, restored thermal and mechanical sensitivity, and improved nerve conductance velocity and mitochondrial function. These effects are dose-dependent, reversible, and ~~Hsp70-dependent.~~HSP70-dependent.

We completed a Phase 1 SAD/MAD trial of oral, ~~once-daily RTA 901~~once daily cemdomespib in healthy adult volunteers to evaluate the safety, tolerability, and pharmacokinetic (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 third quarter of 2022, we completed additional Phase 1 clinical pharmacology studies of ~~RTA 901,~~cemdomespib, including a drug-drug interaction study which demonstrated an acceptable profile.

We ~~are finalizing~~have finalized the design of a randomized, double-blind, placebo-controlled, two-part, 12-week Phase 2 trial of ~~RTA 901~~cemdomespib in patients with ~~diabetic peripheral neuropathic~~DPNP. The trial will assess pain using the numeric pain rating scale (NPRS). We plan to enroll 192 patients randomized in each part for a total of 384 patients. Patients are allowed to take up to one standard of care medication. In order for patients to enroll, they must not have achieved adequate pain control upon entry with a NPRS pain intensity score of at least 4 on a 0 to 10 point scale at screening. We will conduct an exposure-response analysis using Part 1 data to select doses for Part 2. The primary endpoint is the change in average pain intensity assessed by NPRS at Week 12. We plan to initiate the trial in the third quarter of 2023.

There are about four million patients with moderate to severe DPNP in the United States, and ~~are re-evaluating the timing to start the trial.~~about two million adult patients diagnosed with DPNP seek treatment annually. We are the exclusive licensee of ~~RTA 901~~cemdomespib and have worldwide commercial rights.

We and Kyowa Kirin, our strategic collaborator in CKD in Japan, ~~are~~were developing bardoxolone for the treatment of CKD in multiple indications, including ADPKD, 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.

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~~Complete Response Letter (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 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~~We have been sponsoring FALCON, 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.~~

We recently completed a Type C meeting to discuss the program with the FDA. While we have not yet received minutes from the meeting, based on the preliminary comments and subsequent discussion during the meeting, the Division reiterated its concerns included in the CRL. The Division stated that we will need a new trial in patients with Alport syndrome to demonstrate a clinically meaningful effect on the rate of loss of kidney function or, alternatively, show an effect on clinical outcomes, and that the benefits outweigh the risks. It also stated that we will need to provide data demonstrating that the treatment effect accrues over time to support a claim that bardoxolone slows the loss of kidney function in patients with Alport syndrome, although these results do not need to be statistically significant. We are considering our next steps for the 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 and submitted responses in the third quarter. We received the Rapporteurs Day-150 CHMP and PRAC response assessment report which contains comments on our responses. The assessment includes two major objections that preclude the recommendation of marketing authorization, in addition to a list of other concerns that must be addressed. The first major objection pertains to the uncertainty of whether there are additional major and/or active plasma metabolites that require additional in vivo, in vitro, and human metabolite studies to evaluate the metabolism of bardoxolone methyl. The second major objection pertains to the uncertainties regarding clinical safety, including a potential negative effect on renal function associated with long-term bardoxolone treatment. We recently received the draft CHMP Day 180 list of outstanding issues which indicates that the MAA will not be approvable based on major objections identified. We expect to receive the 180-day list of outstanding issues before year end and will determine next steps with the application after receipt of this final report.

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~~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~~rare and serious hereditary form of ~~ages, with an eGFR between 30 and 90 mL/min/1.73 m~~2. 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 605patients are currently enrolled in the trial.~~

CKD. In ~~the first~~fourth quarter of 2022, we ~~finalized~~had received scientific advice from the EMA that the proposed Phase 3 clinical study cannot be used as a ~~protocol amendment~~standalone study to ~~FALCON,~~support the indication of bardoxolone in ADPKD. The EMA recommended that we evaluate, in addition to the traditional endpoints, the effect of bardoxolone on total kidney volume in these patients and requested that we have now secured approval of the amendment with the 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).seek additional guidance on our program.

~~Upon completion of Kyowa Kirin’s~~ reported results from the AYAME study, Phase ~~2 TSUBAKI~~3 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.kidney disease. The primary endpoint is time to onset of a ≥ 30% decrease in eGFR from baseline or ~~ESKD.~~ESRD. The secondary endpoints are time to onset of a ≥ 40% decrease in eGFR from baseline or ~~ESKD,~~ESRD, time to onset of a ≥ 53% decrease in eGFR from baseline or ~~ESKD,~~ESRD, time to onset of ~~ESKD,~~ESRD, and change in eGFR from baseline at each evaluation time point.

AYAME met the primary and key secondary endpoints and no significant safety issues were observed in patients receiving bardoxolone. However, there was no separation in the occurrence of ESRD events between the bardoxolone and placebo groups after three years of treatment.

Based on the results of AYAME and its potential regulatory impact, we and Kyowa Kirin ~~completed patient enrollment~~have decided to discontinue our bardoxolone CKD programs, including the ongoing FALCON Phase 3 trial in ~~AYAME~~patients with ADPKD and EAGLE open-label extension study in ~~June 2019~~patients with Alport syndrome and ~~expects the last patient visit to occur in the second half of 2022~~ADPKD. We will be communicating these plans with ~~topline data available in the first half of 2023.~~regulators and our clinical trial sites immediately.

~~We have advanced commercial launch preparations~~On February 28, 2023, we received FDA approval of SKYCLARYS for the treatment of FA and launched SKYCLARYS in the United States as the first approved product for this disease. Commercialization efforts began immediately following approval with launch strategies that support physician education and ~~are building the infrastructure necessary~~utilization, patient activation, and access to therapy. Reata field sales representatives began physician engagements on March 6th. The sales organization consists of a team of Region Business Directors and Neurology Account Managers responsible for educating healthcare providers (HCPs) currently treating FA. Our Field Access Team was also deployed at approval to help facilitate access to SKYCLARYS. The Access team consists of National Account Directors focused on SKYCLARYS coverage by top national and regional payers, and a Patient Access Liaison Team, hired to support practice-level access needs. Together, this team’s primary responsibility is to facilitate patient access to the ~~commercialization~~drug by working to minimize and navigate payer criteria. Coverage by most national and regional payers is expected to take approximately four to eight weeks or longer via medical exception while formulary review progresses over the next three to six months. Patient access services through Reata REACH went live and were operational at approval, including the REACH call center and website. SKYCLARYS patient enrollment forms became available for download at approval. Reata REACH has been accepting patient enrollment forms submitted by HCPs and is working with payers for coverage authorization through prior authorization and medical exceptions.

In the United States, there are approximately 5,000 diagnosed FA patients today that can be linked HCPs, of ~~omaveloxolone for~~which an estimated 4,500 represent our total on-label addressable market and excludes patients under the ~~treatment~~age of ~~Friedreich’s ataxia, if and when~~16. Through the evaluation of ICD-10 claims data, we ~~receive regulatory approval.~~have identified approximately 2,500 target HCPs treating patients with FA today.

Our ability to launch omaveloxolone is dependent on the successful defense of an NDA and approval by the FDA. Our leadership team is in place to support our core commercial functions including Marketing, Market Access, Sales and Operations. Infrastructure development, including systems and processes necessary for the launch of omaveloxolone are also underway. We have designed patient access programs and our product distribution network. The payer field team has been hired and deployed. Hiring of the sales leadership team is underway and we intend to onboard our sales organization and reimbursement specialists in the first quarter of 2023, pending regulatory advancement. We have identified the health care providers currently treating Friedreich’s ataxia patients. Customer targeting and segmentation is complete, and our branded launch campaign development is underway. Additionally, we are expanding quality and compliance functions to support commercialization. A trade name for omaveloxolone has been selected.

~~We continue to work on completing the manufacturing of omaveloxolone’s commercial drug supply, in anticipation of a launch in the United States.~~23

Our ability to launch omaveloxolone is dependent on the successful filing and defense of an MAA and approval by the 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~~

With regards to ~~commercialize bardoxolone in its territories. We are refining our strategy and market assessments with respect~~omaveloxolone, if approved, we plan to ~~potential launches~~launch in the EU in the second quarter of 2024. In parallel to our regulatory activities to respond to the EMA’s questions concerning our regulatory submission, we have been setting up our commercial launch infrastructure and preparing our reimbursement dossiers for submission in target countries. Beyond the EU, we continue to evaluate ~~market~~

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.~~‌

To date, we have focused most of our efforts and resources on developing our product candidates, ~~and~~ conducting preclinical studies and clinical ~~trials.~~trials, and build-out of commercial infrastructure for SKYCLARYS. In February 2023, we announced that the FDA approved SKYCLARYS, for the treatment of FA in adults and adolescents 16 years of age and older in the U.S. We believe SKYCLARYS commercial drug product will be available through the specialty pharmacy no later than mid-August 2023, at which time we will start to generate product revenue. 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 ~~September 30, 2022,~~March 31, 2023, we had ~~$31.9~~$84.9 million of cash and cash equivalents, marketable debt securities of ~~$404.0~~$236.0 million and an accumulated deficit of ~~$1,482.0~~$1,683.6 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~~We anticipate that we will continue to incur ~~losses for the foreseeable future,~~losses. As we successfully launch SKYCLARYS, and generate commercial product revenue, we anticipate that our losses will ~~increase as~~decrease in the foreseeable future, before 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.reach profitability. 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.~~2022.

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 February 2023, we announced that the FDA approved SKYCLARYS, for the treatment of FA in adults and adolescents 16 years of age and older in the U.S. We believe SKYCLARYS commercial drug product will be available through the specialty pharmacy no later than mid-August 2023, at which time we will start to generate product revenue. 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.

34In May 2023, Kyowa Kirin reported results from the AYAME study, a Phase 3 trial which was conducted in Japan studying the safety and efficacy of bardoxolone in patients with diabetic kidney disease. Based on the results of AYAME and its potential regulatory impact, we and Kyowa Kirin have decided to discontinue our bardoxolone CKD programs, including the FALCON and EAGLE clinical trials. See Note 13, Subsequent Events, to our condensed consolidated financial statements for further details.

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 ~~September 30, 2022,~~March 31, 2023, we have incurred a total of ~~$1,212.5~~$1,315.2 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 candidates portfolio. The process of conducting the necessary preclinical and 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 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.

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.

35In May 2023, Kyowa Kirin reported results from the AYAME study, a Phase 3 trial which was conducted in Japan studying the safety and efficacy of bardoxolone in patients with diabetic kidney disease. Based on the results of AYAME and its potential regulatory impact, we and Kyowa Kirin have decided to discontinue our bardoxolone CKD programs, including the FALCON and EAGLE clinical trials. See Note 13, Subsequent Events, to our condensed consolidated financial statements or further details.

The following table summarizes our research and development expenses incurred during the three ~~and nine~~ months ended ~~September 30, 2022:~~March 31, 2023:


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30				September 30				March 31
	2022		2021		2022		2021		2023		2022
	(in thousands)								(in thousands)
Bardoxolone	$	8,015	$	13,634	$	22,432	$	40,000	$	10,910	$	6,462
Omaveloxolone		9,591		3,475		24,472		6,429		7,481		7,597
RTA 901		3,089		1,164		6,722		4,991
Cemdomespib (previously referred to as RTA 901)										2,448		1,407
Other research and development expenses		22,790		21,157		68,994		62,957		34,638		24,338
Total research and development expenses	$	43,485	$	39,430	$	122,620	$	114,377	$	55,477	$	39,804

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~~Selling, general and administrative expenses consist primarily of employee-related expenses for executive, operational, finance, legal, compliance, commercial, and human resource functions. ~~Other~~Selling, general and administrative expenses also 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 selling, general and administrative expenses will increase in the future as we ~~increase~~continue to build-out our ~~headcount~~global commercial and compliance infrastructure and field team to support the launch of SKYCLARYS in the U.S., as well as the potential launch of SKYCLARYS into additional markets, assuming regulatory approvals, and continue to advance and develop our ~~continued research~~pipeline and advance our product candidates, including partnered programs, into later-stage development, and ~~potential commercialization~~prepare regulatory submissions. However, we expect that certain expenses will be variable depending on the timing of ~~our product candidates. We have also incurred,~~manufacturing batches, clinical trial enrollment 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,results, regulatory ~~compliance programs, and investor relations costs. Additionally, if and when we believe the first regulatory approval of one~~review of our product candidates ~~appears likely, we anticipate an increase in payroll~~ and ~~related~~programs, and stock-based compensation expenses ~~as a result~~due to our determination regarding the probability of ~~our preparation~~vesting for ~~commercial operations, especially for the sales and marketing of our product candidates.~~performance-based awards.

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.

On May 4, 2023, we entered into the Amended Funding Agreement with BXLS. See Note 13, Subsequent Events, to our condensed consolidated financial statements or further details.

On May 5, 2023, we entered into a Term Loan arrangement. See Note 13, Subsequent Events, to our condensed consolidated financial statements or further details.

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.

Comparison of the Three Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)

The following table sets forth our results of operations for the three months ended ~~September 30:~~March 31:


	2022			2021			Change $			Change %			2023			2022			Change $			Change %
	(in thousands, except for percentage data)												(in thousands, except for percentage data)
Collaboration revenue
License and milestone	$	—		$	5,529		$	(5,529	)		(100	)	$	—		$	893		$	(893	)		(100	)
Other revenue		540			1,862			(1,322	)		(71	)		195			21			174			829
Total collaboration revenue		540			7,391			(6,851	)		(93	)		195			914			(719	)		(79	)
Expenses
Operating cost and expenses
Research and development		43,485			39,430			4,055			10			55,477			39,804			15,673			39
General and administrative		27,270			25,736			1,534			6
Selling, general and administrative														54,885			24,841			30,044			121
Depreciation		272			320			(48	)		(15	)		288			308			(20	)		(6	)
Total expenses		71,027			65,486			5,541			8
Total operating cost and expenses														110,650			64,953			45,697			70
Other income (expense), net		(8,515	)		(13,751	)		5,236			38			(5,662	)		(9,772	)		4,110			42
Loss before taxes on income		(79,002	)		(71,846	)		(7,156	)		(10	)
Loss from operations														(116,117	)		(73,811	)		(42,306	)		57
Benefit from (provision for) taxes on income		—			—			—		**				—			(31	)		31			100
Net loss	$	(79,002	)	$	(71,846	)	$	(7,156	)		(10	)	$	(116,117	)	$	(73,842	)	$	(42,275	)		57

License and milestone revenue represented approximately 0% and ~~75%~~98% of total revenue for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. License and milestone revenue decreased by 100%, primarily due to the Company reaching the end of the performance obligation of the Kyowa Kirin Agreement as of June 30, 2022.

Other revenue ~~decreased in~~was immaterial for the three months ended ~~September 30, 2022, compared to~~March 31, 2023, and 2022.

On February 28, 2023, the FDA approved SKYCLARYS for the treatment of FA in the U.S. No product revenue was recognized for the three months ended ~~September 30, 2021, primarily due to a decrease in reimbursements of expenses from Kyowa Kirin~~March 31, 2023 or for ~~manufacturing and non-clinical study expenses incurred.~~the three months ended March 31, 2022.

The following table summarizes our expenses, including as a percentage of total expenses, for the three months ended ~~September 30:~~March 31:


	2022		% of Total Expenses			2021		% of Total Expenses			2023		% of Total Expenses			2022		% of Total Expenses
	(in thousands, except for percentage data)										(in thousands, except for percentage data)
Research and development	$	43,485		61	%	$	39,430		60	%	$	55,477		50	%	$	39,804		61	%
General and administrative		27,270		38	%		25,736		39	%
Selling, general and administrative												54,885		49	%		24,841		38	%
Depreciation		272		1	%		320		1	%		288		1	%		308		1	%
Total expenses	$	71,027				$	65,486				$	110,650				$	64,953

Research and development expenses increased by ~~$4.1~~$15.7 million, or ~~10%~~39%, for the three months ended ~~September 30, 2022,~~March 31, 2023, compared to the three months ended ~~September 30, 2021.~~March 31, 2022. The increase is due to ~~personnel~~an increase in stock-based compensation due to the vesting of certain performance-based equity grants related to the receipt of FDA approval of SKYCLARYS on February 28, 2023, and ~~personnel-related costs to support the product development activities.~~certain ongoing clinical study costs.

Research and development expenses, as a percentage of total expenses, was ~~61%~~50% and ~~60%~~61% for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. The ~~increase~~decrease of 1%11% was due to the proportionately larger increase in ~~research~~selling, general and ~~development~~administrative expenses, compared to ~~general~~research and ~~administrative~~development expenses.

~~General~~Selling, general and administrative expenses increased by ~~$1.5~~$30.0 million, or 6%121%, for the three months ended ~~September 30, 2022,~~March 31, 2023, compared to the three months ended ~~September 30, 2021.~~March 31, 2022. The increase was primarily due to ~~rent expense~~an increase in stock-based compensation due to the vesting of certain performance-based equity grants related to the ~~new headquarters building lease that commenced in December 2021.~~receipt of FDA approval of SKYCLARYS on February 28, 2023, and increased commercial activities for SKYCLARYS.

~~General~~Selling, general and administrative expenses, as a percentage of total expenses, was ~~38%~~49% and ~~39%~~38%, for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. The ~~decrease~~increase of 1%11% was due to the proportionately larger increase in ~~research and development expenses, compared to general and administrative expenses.~~

Other income (expense), net decreased by $5.2 million for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. The decrease was primarily due to a $1.7 million decrease of interest expense attributable to the payable to AbbVie under to the Reacquisition Agreement, which was fully satisfied in 2021, by a $1.3 million decrease in effective interest rate in non-cash interest expense on liability related to the sale of future royalties, and by a $2.2 million increase in interest income generated from marketable debt securities.

~~Benefit from taxes on income for the three months ended September 30, 2022 remained consistent when compared to the three months ended September 30, 2021.~~

~~The following table sets forth our results of operations for the nine months ended September 30, 2022:~~

License and milestone revenue represented approximately 74% and 68% of total revenue for the nine months ended September 30, 2022 and 2021, respectively, and consisted of the recognition of Kyowa Kirin deferred revenue. License and milestone revenue decreased by $5.5 million, or 77% during the nine months ended September 30, 2022, compared to the nine months ended September 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 by $2.9 million, or 83%, in the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to a decrease in reimbursements of expenses from Kyowa Kirin for manufacturing and non-clinical study expenses incurred.

~~The following table summarizes our expenses, including as a percentage of total expenses, for the nine months ended September 30:~~

Research and development expenses increased by $8.2 million, or 7% for the nine months ended September 30, 2022, compared to the nine months ended September 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 61% and 62% for the nine months ended September 30, 2022 and 2021, respectively. The decrease of 1% was due to the proportionately larger increase in general and administrative expenses, compared to research and development expenses.

General and administrative expenses increased by $8.8 million, or 13%, for the nine months ended September 30, 2022, compared to the nine months ended September 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 38% and 37%, for the nine months ended September 30, 2022 and 2021, respectively. The increase of 1% was due to the proportionately larger increase inselling, general and administrative expenses, compared to research and development expenses.

Other income (expense), net decreased by ~~$11.7~~$4.1 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, compared to the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The decrease was primarily due to a $5.2 million decrease of interest expense attributable to the payable to AbbVie under to the Reacquisition Agreement, which was fully satisfied in 2021, by a $3.5 million decrease in effective interest rate in non-cash interest expense on liability related to the sale of future royalties, and by a $3.0$3.3 million increase in interest income generated from marketable debt ~~securities.~~

~~We periodically reassess~~securities, a $2.0 million increase related to the ~~expected royalty payments~~employee retention credit under the CARES Act, and a $1.1 million increase of interest expense attributable to the payable to BXLS 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 nine months ended September 30, 2022.Agreement.

~~For~~Benefit from (Provision for) taxes on income was immaterial for the ~~nine~~three months ended September 30, 2022 compared to the nine months ended September 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.March 31, 2023 and 2022.

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 ~~September 30, 2022,~~March 31, 2023, 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 ~~September 30, 2022,~~March 31, 2023, we had available cash and cash equivalents of approximately ~~$31.9~~$84.9 million and marketable debt securities of ~~$404.0~~$236.0 million. Our cash and cash equivalents and marketable debt securities are invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.

The following table sets forth the primary sources and uses of cash for each of the ~~nine~~three months ended ~~September 30:~~March 31:


	2022			2021			2023			2022
	(in thousands)						(in thousands)

Net cash (used in) provided by:
Net cash provided by (used in) :
Operating activities	$	(153,841	)	$	(112,769	)	$	(81,449	)	$	(58,185	)
Investing activities		(405,670	)		(1,136	)		110,995			(288	)
Financing activities		1,171			8,967			13,082			194
Net change in cash and cash equivalents	$	(558,340	)	$	(104,938	)	$	42,628		$	(58,279	)

Net cash used in operating activities was ~~$153.8~~$81.5 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, consisting primarily of a net loss of ~~$226.4~~$116.1 million adjusted for non-cash items including stock-based compensation expense of ~~$43.8~~$38.1 million, non-cash interest expense on liability related to sale of future royalty of ~~$30.8~~$11.0 million, amortization of premium on marketable debt securities of $2.0 million, and a net ~~decrease~~change in operating assets and liabilities of ~~$1.7~~$12.7 million. The change in operating assets and liabilities that impacted our use of cash in operations include a decrease of ~~$6.2~~$4.4 million in accounts payable due to timing of payments, ~~and a~~an increase of ~~$2.9~~$5.7 million in inventory and an increase of $1.3 million in prepaids and other assets, and a decrease of ~~$1.6 million in deferred revenue, offset by an increase of $2.5~~$1.3 million in direct research and other current and long-term ~~liabilities and a $6.7 million increase in operating lease obligations.~~liabilities.

Net cash used in operating activities was $112.8 million for the nine months ended September 30, 2021, consisting primarily of a net loss of $212.0 million adjusted for non-cash items including stock-based compensation expense of $41.6 million, non-cash interest expense on liability related to sale of future royalty of $34.3 million, depreciation, amortization of issuance costs, and imputed interest expense of $6.2 million, and a net decrease in operating assets and liabilities of $17.1 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, a decrease of $3.1 million in accounts payable due to timing of payments, and a decrease in deferred revenue of $2.1 million.

Net cash provided by investing activities was $111.0 million and net cash used in investing activities was ~~$405.7 million and $1.1~~$0.3 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. The ~~increase~~change is due to the purchase of ~~$477.8~~$63.9 million in marketable debt securities during the period, offset by cash received of $175.0 million from maturities of marketable securities.

Net cash provided by financing activities was ~~$1.2~~$13.1 million and ~~$9.0~~$0.2 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, primarily consisting of stock options exercises.

To date, we have not generated any revenue from product sales. We ~~do not know when or whether~~believe SKYCLARYS commercial drug product will be available through the specialty pharmacy no later than mid-August 2023, at which time we will ~~generate any revenue from product sales. We do not expect~~start 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.~~revenue. We anticipate that we will continue to incur losses in the future periods. As we launch SKYCLARYS and generate commercial product revenue, we anticipate that our losses ~~for~~will decrease in the foreseeable future, ~~and~~before 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.~~reach profitability. 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 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.

On May 4, 2023, we entered into an Amended Funding Agreement (the “Amended Funding Agreement”) with BXLS. See Note 13, Subsequent Events, to our condensed consolidated financial statements or further details.

On May 5, 2023, we entered into a Term Loan arrangement. See Note 13, Subsequent Events, to our condensed consolidated financial statements or further details.

Our ~~longer term~~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~~product revenue and the timing of our expenditures related to clinical trials. We believe our existing cash and cash equivalents and marketable debt securities will be sufficient to enable us to fund our operations through the ~~fourth quarter~~end of ~~2024.~~2026. 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 SKYCLARYS and our other 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. ~~Furthermore, the recent rise in interest rates would make debt financing more expensive.~~ 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.~~2022.

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:

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.

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 ~~September 30, 2022~~March 31, 2023 (unaudited):


	Payments due by period										Payments due by period
	Less than 1 year		1 to 3 years		4 to 5 years		6 years and beyond		Total		Less than 1 year		1 to 3 years		4 to 5 years		6 years and beyond		Total
	(unaudited, in thousands)										(unaudited, in thousands)
Operating lease obligations(1)	$	13,637	$	17,865	$	28,101	$	172,571	$	232,174	$	5,961	$	20,090	$	24,325	$	141,770	$	192,146
Total contractual obligations	$	13,637	$	17,865	$	28,101	$	172,571	$	232,174	$	5,961	$	20,090	$	24,325	$	141,770	$	192,146

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

The terms of the Development Agreement require us to potentially 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.

On May 4, 2023, we entered into an Amended Funding Agreement with BXLS. See Note 13, Subsequent Events, to our condensed consolidated financial statements for further details.

On May 5, 2023, we entered into a Term Loan arrangement. See Note 13, Subsequent Events, to our condensed consolidated financial statements for further details.

As of ~~September 30, 2022,~~March 31, 2023, 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.

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.~~2022.

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.~~Securities and Exchange Commission (SEC). Please refer to any changes to significant accounting policies during the quarter ended March 31, 2023 in Note 2 of Part I, Item 1 of this Quarterly Report on Form 10-Q.

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.

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 ~~$31.9~~$84.9 million and marketable debt securities of ~~$404.0~~$236.0 million at ~~September 30, 2022,~~March 31, 2023, 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.

We will pay interest under our Loan Agreement at a floating rate. See Note 13, Subsequent Events, to our consolidated financial statements for further details.

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 ~~September 30, 2022.~~March 31, 2023. 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 ~~September 30, 2022,~~March 31, 2023, 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.

~~There have been no changes~~During the three months ended March 31, 2023, in connection with the approval of SKYCLARYS, we designed and implemented new procedures and controls around our inventory processes. No other change in our internal control over financial reporting ~~as such term is~~(as defined in Rules 13a-15(f) and 15d-15(f) ~~promulgated~~ under the Exchange ~~Act,~~Act) occurred during the ~~nine months~~quarter ended ~~September 30, 2022,~~March 31, 2023 that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

For a discussion of material pending legal proceedings, please read Note ~~10,~~12, 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.

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,~~2022, 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.~~2022.

On May 5, 2023, we, as the borrower, and certain of our direct and indirect subsidiaries party thereto from time to time, as the guarantors (the Guarantors and, collectively with the us, the Credit Parties), entered into a loan agreement (the Loan Agreement) with BPCR Limited Partnership (as a Lender), BioPharma Credit Investments V (Master) LP (as a Lenders), and BioPharma Credit PLC, as collateral agent for the Lenders (in such capacity, the Collateral Agent), pursuant to which the Lenders agreed to make term loans to the Borrower in an aggregate principal amount of up to $275 million. The proceeds of the loans will be used to fund our general corporate and working capital requirements.

Pursuant to the terms of the Loan Agreement, the Term Loans will be advanced in up to four tranches. The first tranche (the Tranche A Loan) is expected to be advanced in the amount of $75 million on May 12, 2023, five (5) business days following the effective date of the Loan Agreement (the “Tranche A Closing Date”), subject to entering into a customary security agreement and the satisfaction of other customary conditions precedent. The second tranche (the Tranche B Loan) of $50 million will be advanced following the earlier to occur of (i) the approval of our prior approval submission by the FDA and (ii) the production of the fourth batch of omaveloxolone capsules within the

parameters and subject to the requirements of the approval of omaveloxolone by the FDA received in February 2023 (the Tranche B Trigger Date), subject to the satisfaction of customary conditions precedent, including that the Tranche B Trigger Date must occur on or prior to March 31, 2024; provided, however, that if the Tranche B Loan borrowing conditions are not satisfied on or prior to March 31, 2024, then no Tranche B Loan or other loans shall be extended. The third tranche (the Tranche C Loan) of $75 million will be advanced following our achieving a trailing twelve-month net product sales and royalty revenues milestone ranging from $40 million to $55 million based on the date of the first commercial sale of our omaveloxolone product, subject the prior funding of the Tranche B Loan and to the satisfaction of customary conditions precedent; provided, however, that if the Tranche C Loan borrowing conditions are not satisfied on or prior to March 31, 2024, then no Tranche C Loan shall be extended. The fourth tranche (the Tranche D Loan, and together with the Tranche A Loan, the Tranche B Loan and the Tranche C Loan, the Term Loans) of $75 million will be advanced following our achieving a trailing twelve-month net product sales and royalty revenues milestone of $100 million for any trailing twelve month period ending on or prior to December 31, 2024, subject to the prior funding of the Tranche B Loan and the Tranche C Loan and subject to the satisfaction of customary conditions precedent; provided, however, that if the Tranche D Loan borrowing conditions are not satisfied on or prior to December 31, 2024, then no Tranche D Loan shall be extended. The Tranche A Loan, Tranche B Loan and Tranche C Loan are mandatory and the failure of the Company to borrow either the Tranche B Loan or Tranche C Loan following satisfaction of the applicable conditions precedent shall be an Event of Default. Funding of the Tranche D Loan, subject to satisfaction of the applicable conditions precedent, is at our option.

The Term Loans will mature on the 5th year anniversary of the Tranche A Closing Date (Maturity Date), provided that if we do not satisfy the Tranche B Loan borrowing conditions on or prior to March 31, 2024, the Maturity Date shall be March 31, 2024. Repayment of outstanding principal of the Term Loans will be made in eight equal quarterly payments of principal commencing on June 30, 2026; provided however, that if we achieve a trailing twelve month net product sales and royalty revenues milestone of $250 million as of March 31, 2027, at our option, repayment of outstanding principal of the Term Loans will be made in four equal quarterly payments of principal commencing on June 30, 2027.

The Term Loans bear interest at 7.50% plus three-month SOFR per annum with a SOFR floor of 2.50%. We will pay to the Lenders an additional consideration (the Additional Consideration) equal to 2.00% of the Lenders’ total committed amount to fund the Term Loans, payable with respect to each Term Loan on the funding date of such Term Loan; provided however, if we achieve the Tranche B Loan and Tranche C Loan net product sales and royalty revenues milestones noted above but fail to timely borrow the Tranche B Loan or Tranche C Loan (including as a result of the prior prepayment in full of the Term Loans), then upon such failure any unpaid Additional Consideration with respect to the Tranche B Loan or Tranche C Loan shall become immediately due and payable. We may elect to prepay the Term Loans in whole prior to the Maturity Date with such prepayments being subject to a prepayment premium equal to the principal amount so prepaid multiplied by 3% if made prior to the 3rd anniversary of the funding date of the applicable Term Loan, 2% if made on or after the 3rd anniversary of the funding date of the applicable Term Loan but prior to the 4th anniversary of the funding date of the applicable Term Loan, and 1% if made on or after the 4th anniversary of the funding date of the applicable Term Loan but prior to the Maturity Date. In addition to the prepayment premium, prepayments of any Term Loan prior to the 2nd anniversary of the funding date of such Term Loan are subject to a makewhole amount equal to the sum of all interest that would have accrued through such 2nd anniversary. If the Term Loans are accelerated following the occurrence of an event of default or the Maturity Date occurs on March 31, 2024, as described above, we shall immediately pay to the Lenders the sum of all obligations for principal, interest, and the applicable makewhole and prepayment premium and the Tranche B Loan and Tranche C Loan Additional Consideration. We are required to prepay the Term Loans, together with any applicable make-whole and prepayment premiums and any unpaid Additional Consideration in respect of the Tranche B Loan and Tranche C Loan, upon a change of control and prior to certain prepayments or redemptions of permitted convertible debt, subject to exceptions for refinancings and conversions or exchanges for equity.

Our obligations under the Loan Agreement are guaranteed on a full and unconditional basis by the Guarantors, consisting of our US and certain of our foreign subsidiaries, and are secured by substantially all of the respective Credit Parties’ assets, including intellectual property, subject to certain exceptions.

The Loan Agreement contains customary affirmative and restrictive covenants and representations and warranties. We and our subsidiaries are bound by certain affirmative covenants setting forth actions that are required during the term of the Loan Agreement, including, without limitation, certain information delivery requirements, obligations to maintain certain insurance, and certain notice requirements. Additionally, we and our subsidiaries are bound by certain restrictive covenants setting forth actions that are not permitted to be taken during the term of the

Loan Agreement without the Lenders’ prior written consent, including, without limitation, (i) selling or disposing of assets, including certain intellectual property, (ii) amending, modifying or waiving certain material agreements or organizational documents, (iii) consummating certain change in control transactions, (iv) incurring certain additional indebtedness, (v) incurring any non-permitted lien or other encumbrance on our or our subsidiaries’ assets, (vi) paying dividends or making any distribution or payment on or redeeming, retiring or purchasing any equity interests, and (vii) making payments of certain subordinated indebtedness, in each case, subject to certain exceptions. The Loan Agreement also contains a financial covenant requiring that we achieve certain trailing twelve month net product sales and royalty revenues, measured and tested on a quarterly basis. The Loan Agreement also contains the following events of default: (i) our failure to pay principal, interest and other amounts when due, (ii) the breach of the covenants under the Loan Agreement, (iii) the occurrence of a material adverse change or a withdrawal event in respect of our omaveloxolone product, (iv) certain attachments of the Credit Parties assets and restraints on their business, (v) certain bankruptcy or insolvency events, (vi) cross-default of third-party indebtedness, (vii) the failure to pay judgements rendered against them, (viii) material misrepresentations, (ix) the loan documents ceasing to create a valid security interest in a material portion of the collateral, and (x) the occurrence of certain ERISA events. Upon the occurrence of an event of default, the Lenders may, among other things, accelerate our obligations under the Loan Agreement (including all obligations for principal, interest and any applicable make-whole and prepayment premiums); provided that upon an event of default relating to certain bankruptcy or insolvency events, all obligations will be immediately accelerated.

The foregoing description of the terms of the Loan Agreement does not purport to be complete and is subject to, and is qualified in its entirety by, reference to the Loan Agreement, which the Company has filed as an exhibit to this Quarterly Report.

On May 4, 2023, we entered into an Amended Funding Agreement with an affiliate of Blackstone Life Sciences, LLC (BXLS). The Amended Funding Agreement amends and restates in its entirety our existing Development and Commercialization Funding Agreement, dated as of June 10, 2020 (the Original Funding Agreement) between us and BXLS.

The Amended Funding Agreement provides for (i) a low, single digit royalty on net sales of our omaveloxolone product for FA (subject to a fixed dollar cap and limited in time to the twenty years following commercial launch of the omaveloxolone product) (the Omav Royalty); and (ii) a single digit royalty on net sales of our bardoxolone product (limited in time to the fifteen years following the commercial launch of the bardoxolone product).

The Amended Funding Agreement also provides that, with respect to any change of control of the Company prior to January 1, 2028, we will pay to BXLS a change of control payment in an amount equal to (x) if the date of such change of control is prior to June 10, 2023, $375 million and (y) if the date of such change of control is on or after June 10, 2023, $300 million, or, in each case, potentially a lesser amount based on the sum of certain payments to BXLS, including the Omav Licensing Payments (as defined below), prior to the change of control.

The Amended Funding Agreement also provides that, in the event that prior to the earlier of a change of control of the Company or January 1, 2028, we or one of our affiliates enters into certain material transactions with respect to commercialization of our omaveloxolone product in France, Germany, Italy, Spain, the United Kingdom or the United States (collectively, Omav Licensing Transactions), then, with respect to any payment received in connection with an Omav Licensing Transaction, we shall pay to BXLS an amount equal to a certain percentage of each such payment (the Omav Licensing Payments) until such time as (i) BXLS has received $300 million, or potentially a lesser amount based on the sum of certain payments previously made to BXLS, or (ii) BXLS has received a change of control payment.

Pursuant to the Amended Development Agreement, to secure our payment obligations to BXLS we have (i) granted BXLS a security interest in a segregated deposit account and (ii), subject to certain limitations as set forth in the Amended Funding Agreement, agreed to maintain in such account an initial balance and thereafter an amount equal to the aggregate amount of Omav Royalty payments made for the immediately preceding two calendar quarter period. In addition, substantially all covenants regarding commercialization of bardoxolone and restricting the incurrence of indebtedness and license and licensing transactions, as well as termination events providing for liquidated damages, in the Original Funding Agreement were removed and all prior security interests granted to BXLS were released.

The foregoing description of the terms of the Amended Funding Agreement does not purport to be complete and is subject to, and is qualified in its entirety by, reference to the Amended Funding Agreement, which the Company has filed as an exhibit to this Quarterly Report.

# Information in this exhibit identified by ~~three asterisks [***]~~brackets 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.

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.


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)


-
		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	1718
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4434
Item 4.	Controls and Procedures	4434
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	4535
Item 1A.	Risk Factors	4535
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4535
Item 3.	Defaults Upon Senior Securities	4535
Item 4.	Mine Safety Disclosures	4535
Item 5.	Other Information	4535
Item 6.	Exhibits	4639
Signatures		4740


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
~~CHMP~~Cemdomespib		~~Join Committee for Medicinal Products for Human Use~~Previously referred to as RTA 901
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~~ESPP		Reata Pharmaceuticals, Inc. 2022 Employee Stock Purchase Plan
ESRD		End stage ~~kidney~~renal disease
Exchange Act		Securities Exchange Act of 1934
~~FA-COMS~~FA		~~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
~~PRAC~~		~~Pharmacovigilance Risk Assessment Committee~~
~~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


	~~Placebo-Controlled~~ ~~Week 48 (Δ~~1)	~~Delayed-Start~~ ~~Week Ex. 72 (Δ~~2)
~~Difference (LS Mean ± SE)~~	~~-2.25 ± 1.07~~ ~~p=0.037~~	~~-3.51 ± 1.45~~ ~~p=0.016~~
~~Estimate = Δ~~2 ~~– 0.5 × Δ~~1	~~-2.39 ± 1.38~~
~~Upper Limit of 1-sided~~ ~~90% CI for Estimate~~	~~-0.615~~
1~~Non-Inferiority test performed using a MMRM analysis with a Toeplitz covariance structure.~~


	~~mFARS Change~~ ~~per Year~~
~~Omav-to-Omav (n=34)~~	~~0.27 ± 0.59~~
~~Placebo-to-Omav (n=39)~~	~~0.45 ± 0.38~~
~~Difference~~	~~-0.18± 0.67~~ ~~p=0.79~~


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


	Nine Months Ended September 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		—		—		—			—		—		(226,399	)		(226,399	)
Compensation expense related to stock options		—		—		—			—		43,754		—			43,754
Exercise of options		3,291		—		47,936			—		1,171		—			1,171
Issuance of common stock upon vesting of restricted stock units		165,566		1		4,366			—		—		—			1
Conversion of common stock Class B to Class A		58,203		—		(58,203	)		—		—		—			—
Balance at September 30, 2022		31,705,257	$	32		4,913,348		$	5	$	1,486,509	$	(1,482,030	)	$	4,516


	Nine Months Ended September 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		—		—		—			—		—		(212,001	)		(212,001	)
Compensation expense related to stock options		—		—		—			—		41,580		—			41,580
Exercise of options		—		—		229,543			—		8,967		—			8,967
Conversion of common stock Class B to Class A		—		—		7,661			—		—		—			—
Issuance of Common Stock		362,886		—		(362,886	)				—					—
Balance at September 30, 2021		31,472,040	$	31		4,919,249		$	5	$	1,426,187	$	(1,170,246	)	$	255,977


	As of September 30,
	2022			2021
Weighted-average remaining lease term (in years)		15.3			1.0
Weighted-average discount rate		6.5	%		8.1	%


	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.


	~~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~~


~~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)~~


	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


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~~Third Amended and Restated Bylaws, dated as of ~~December 7, 2016~~March 1, 2023 (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)~~March 1, 2023).

10.1*10.1#		~~Reata Pharmaceuticals,~~Amendment No. 2 to Exclusive License Agreement, dated as of April 5, 2022, by and between the KU Center for Technology Commercialization, Inc. ~~2022 Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.3 to~~and the ~~Company's S-8 (File No.333-267755), filed with the SEC on October 5, 2022).~~Registrant, as amended.

10.2*		Loan Agreement, dated May 5, 2023, by and among BPCR Limited Partnership and BioPharma Credit Investments V (Master) LP, as Lenders, BioPharma Credit PLC, as Collateral Agent, and Reata Pharmaceuticals, Inc.

10.3*#		Amended and Restated Development and Commercialization Funding Agreement between the Company and BXLS V – River L.P, dated as of May 4, 2023.

31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-1d4(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)


Date: ~~November 8, 2022~~May 10, 2023	REATA PHARMACEUTICALS, INC.

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


	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


	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


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