~~(Former name, former address and former fiscal year, if changes since last report)~~

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 7, 2019,~~August 5, 2020, the registrant had ~~24,765,410~~28,559,247 shares of Class A common stock, $0.001 par value per share, and ~~5,506,495~~5,045,092 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. ~~All~~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.

Abbreviated Term		Defined Term
~~6MWD~~		~~6-minute walk distance~~
AbbVie		AbbVie Inc.
ADPKD		Autosomal dominant polycystic kidney disease
ASU		Accounting Standards Update
Bardoxolone		Bardoxolone methyl
BXLS		Blackstone Life Sciences, LLC
CARES Act		Coronavirus Aid, Relief, and Economic Security Act
CKD		Chronic kidney disease
COVID-19		Coronavirus disease
CRO		Contract research organization
~~CTD-PAH~~		~~Pulmonary arterial hypertension associated with connective tissue disease~~
~~DSMB~~		~~Data safety monitoring board~~
~~EGC~~		~~Emerging growth company~~
eGFR		Estimated glomerular filtration rate
ESKD		End stage kidney disease
Exchange Act		Securities Exchange Act of 1934
FA		Friedreich’s ataxia
FARA		Friedreich’s Ataxia Research Alliance
FASB		Financial Accounting Standards Board
FDA		United States Food and Drug Administration
FSGS		Focal segmental glomerulosclerosis
GFR		Glomerular filtration rate
IgAN		IgA nephropathy
~~I-PAH~~IST		~~Idiopathic form of PAH~~
~~IPO~~		~~Initial public offering~~
~~IRS~~		~~Internal Revenue Service~~
~~JOBS Act~~		~~Jumpstart Our Business Startups Act of 2012~~Investigator-Sponsored Trial
KKC		Kyowa Kirin Co., Ltd. ~~(formerly KHK or Kyowa Hakko Kirin Co., Ltd.)~~
mFARS		Modified Friedreich’s Ataxia Rating Scale
NDA		New Drug Application
~~PAH~~NYU		~~Pulmonary arterial hypertension~~New York University Grossman School of Medicine
~~Retained eGFR~~PDUFA		~~eGFR change after a four-week withdrawal of drug~~Prescription Drug User Fee Act
~~SAE~~Registrational trial		~~Serious adverse event~~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
Sarbanes-Oxley Act		The Sarbanes-Oxley Act of 2002
SEC		U.S. Securities and Exchange Commission
T1D CKD		Type 1 diabetic CKD
T2D CKD		Type 2 diabetic CKD

	September 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
	(unaudited)						(unaudited)
Assets
Cash and cash equivalents	$	240,149		$	337,790		$	610,419		$	664,324
Prepaid expenses and other current assets		6,382			4,483			7,830			4,952
Income tax receivable								22,218			—
Total current assets		246,531			342,273			640,467			669,276
Property and equipment, net		2,859			1,445			4,267			2,996
Other assets		9,733			1,490			7,670			10,148
Total assets	$	259,123		$	345,208		$	652,404		$	682,420
Liabilities and stockholders’ (deficit) equity
Liabilities and stockholders’ equity
Accounts payable		3,582			4,473			11,263			1,908
Accrued direct research liabilities		19,848			15,416			16,689			23,774
Other current liabilities		14,398			4,696			14,545			11,631
Current portion of long-term debt, net of debt issuance cost		5,313			—
Current portion of payable to collaborators								—			150,000
Current portion of deferred revenue		31,421			31,335			4,688			4,701
Total current liabilities		74,562			55,920			47,185			192,014
Other long-term liabilities		6,198			524			6,940			6,982
Long-term debt, net of current portion and debt issuance cost		74,923			79,219
Term loan, net of debt issuance costs								—			155,017
Liability related to sale of future royalties, net								294,234			—
Payable to collaborators, net of current portion								70,055			66,862
Deferred revenue, net of current portion		170,863			194,386			2,363			4,688
Total noncurrent liabilities		251,984			274,129			373,592			233,549
Commitments and contingencies
Stockholders’ (deficit) equity:
Common stock A, $0.001 par value: 500,000,000 shares authorized; issued and outstanding – 24,525,768 and 24,000,683 at September 30, 2019 and December 31, 2018, respectively		25			24
Common stock B, $0.001 par value: 150,000,000 shares authorized; issued and outstanding – 5,598,731 and 5,728,175 shares at September 30, 2019 and December 31, 2018		6			6
Stockholders’ equity:
Common stock A, $0.001 par value: 500,000,000 shares authorized; issued and outstanding – 28,526,532 and 27,878,550 at June 30, 2020 and December 31, 2019, respectively								29			28
Common stock B, $0.001 par value: 150,000,000 shares authorized; issued and outstanding – 5,058,319 and 5,318,157 shares at June 30, 2020 and December 31, 2019, respectively								5			5
Additional paid-in capital		456,097			435,452			1,058,606			967,317
Accumulated deficit		(523,551	)		(420,323	)		(827,013	)		(710,493	)
Total stockholders’ (deficit) equity		(67,423	)		15,159
Total liabilities and stockholders’ (deficit) equity	$	259,123		$	345,208
Total stockholders’ equity								231,627			256,857
Total liabilities and stockholders’ equity							$	652,404		$	682,420

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30						June 30
	2019			2018			2019			2018			2020			2019			2020			2019
Collaboration revenue
License and milestone	$	7,898		$	4,766		$	23,437		$	44,452		$	1,169		$	7,813		$	2,338		$	15,539
Other revenue		344			409			409			685			1,904			20			2,088			64
Total collaboration revenue		8,242			5,175			23,846			45,137			3,073			7,833			4,426			15,603
Expenses
Research and development		32,279			27,144			87,948			71,979			36,783			29,554			84,436			55,668
General and administrative		14,283			7,486			36,027			24,802			16,600			11,706			37,387			21,744
Depreciation		258			105			659			311			284			232			562			401
Total expenses		46,820			34,735			124,634			97,092			53,667			41,492			122,385			77,813
Other income (expense)
Investment income		1,311			1,094			4,812			1,787
Interest expense		(2,389	)		(2,360	)		(7,199	)		(3,773	)
Loss on extinguishment of debt		—			—			—			(1,007	)
Other income (expense)		—			—			7			—
Total other income (expense)		(1,078	)		(1,266	)		(2,380	)		(2,993	)
Other income (expense), net														(16,990	)		(701	)		(20,804	)		(1,301	)
Loss before taxes on income		(39,656	)		(30,826	)		(103,168	)		(54,948	)		(67,584	)		(34,360	)		(138,763	)		(63,511	)
Provision for taxes on income		38			9			60			15
(Benefit from) provision for taxes on income														(3	)		20			(22,243	)		23
Net loss	$	(39,694	)	$	(30,835	)	$	(103,228	)	$	(54,963	)	$	(67,581	)	$	(34,380	)	$	(116,520	)	$	(63,534	)
Net loss per share—basic and diluted	$	(1.32	)	$	(1.07	)	$	(3.44	)	$	(2.03	)	$	(2.03	)	$	(1.14	)	$	(3.51	)	$	(2.12	)
Weighted-average number of common shares used in net loss per share basic and diluted		30,110,391			28,704,853			30,004,211			27,022,269			33,265,778			30,069,048			33,243,931			29,950,241

Unaudited Consolidated Statements of Stockholders’ Equity (Deficit) ~~Equity~~

	Three Months Ended September 30, 2019																			Three Months Ended June 30, 2020
	Common Stock A				Common Stock B					Additional Paid-In		Shareholder Notes		Total Accumulated			Total Stockholders’			Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital		Receivable		Deficit			(Deficit) Equity			Shares		Amount		Shares			Amount		Capital		Deficit			Equity
Balance at June 30, 2019		24,466,407	$	24		5,631,527		$	6	$	450,354	$	—	$	(483,857	)	$	(33,473	)
Balance at March 31, 2020																					28,166,652	$	28		5,070,271		$	5	$	988,046	$	(759,432	)	$	228,647
Net loss		—		—		—			—		—		—		(39,694	)		(39,694	)		—		—		—			—		—		(67,581	)		(67,581	)
Compensation expense related to stock options		—		—		—			—		5,380		—		—			5,380			—		—		—			—		14,796		—			14,796
Exercise of options		—		—		26,565			—		363		—		—			363			—		—		7,135			—		365		—			365
Conversion of common stock Class B to Class A		59,361		1		(59,361	)		—		—		—		—			1			19,087		—		(19,087	)		—		—		—			—
Balance at September 30, 2019		24,525,768	$	25		5,598,731		$	6	$	456,097	$	—	$	(523,551	)	$	(67,423	)
Issuance of Common Stock																					340,793		1		—			—		55,399		—			55,400
Balance at June 30, 2020																					28,526,532	$	29		5,058,319		$	5	$	1,058,606	$	(827,013	)	$	231,627

	Nine Months Ended September 30, 2019																			Six Months Ended June 30, 2020
	Common Stock A				Common Stock B					Additional Paid-In		Shareholder Notes		Total Accumulated			Total Stockholders’			Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital		Receivable		Deficit			(Deficit) Equity			Shares		Amount		Shares			Amount		Capital		Deficit			Equity
Balance at December 31, 2018		24,000,683	$	24		5,728,175		$	6	$	435,452	$	—	$	(420,323	)	$	15,159
Balance at December 31, 2019																					27,878,550	$	28		5,318,157		$	5	$	967,317	$	(710,493	)	$	256,857
Net loss		—		—		—			—	$	—		—		(103,228	)		(103,228	)		—		—		—			—	$	—		(116,520	)		(116,520	)
Compensation expense related to stock options		—		—		—			—	$	14,090		—		—			14,090			—		—		—			—	$	34,104		—			34,104
Exercise of options		—		—		395,641			—	$	6,448		—		—			6,448			—		—		47,351			—	$	1,786		—			1,786
Conversion of common stock Class B to Class A		525,085		1		(525,085	)		—	$	—		—		—			1			307,189		—		(307,189	)		—	$	—		—			—
Other shareholder transactions		—		—		—			—	$	107		—		—			107
Balance at September 30, 2019		24,525,768	$	25		5,598,731		$	6	$	456,097	$	—	$	(523,551	)	$	(67,423	)
Issuance of Common Stock																					340,793		1		—			—	$	55,399		—			55,400
Balance at June 30, 2020																					28,526,532	$	29		5,058,319		$	5	$	1,058,606	$	(827,013	)	$	231,627

	Three Months Ended June 30, 2019
	Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital		Deficit			(Deficit)
Balance at March 31, 2019		24,403,477	$	24		5,639,666		$	6	$	444,837	$	(449,477	)	$	(4,610	)
Net loss		—		—		—			—		—		(34,380	)		(34,380	)
Compensation expense related to stock options		—		—		—			—		4,483		—			4,483
Exercise of options		—		—		54,791			—		1,034		—			1,034
Conversion of common stock Class B to Class A		62,930		—		(62,930	)		—		—		—			—
Balance at June 30, 2019		24,466,407	$	24		5,631,527		$	6	$	450,354	$	(483,857	)	$	(33,473	)

	Three Months Ended September 30, 2018																			Six Months Ended June 30, 2019
	Common Stock A				Common Stock B					Additional Paid-In		Shareholder Notes		Total Accumulated			Total Stockholders’			Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital		Receivable		Deficit			(Deficit) Equity			Shares		Amount		Shares			Amount		Capital		Deficit			Equity (Deficit)
Balance at June 30, 2018		20,244,675	$	20		5,961,183		$	6	$	196,013	$	—	$	(363,913	)	$	(167,874	)
Balance at December 31, 2018																					24,000,683	$	24		5,728,175		$	6	$	435,452	$	(420,323	)	$	15,159
Net loss		—		—		—			—		—		—		(30,835	)		(30,835	)		—		—		—			—		—		(63,534	)		(63,534	)
Compensation expense related to stock options		—		—		—			—		2,745		—		(10	)		2,735			—		—		—			—		8,710		—			8,710
Exercise of options		—		—		41,672			—		672		—		—			672			—		—		369,076			—		6,085		—			6,085
Public offering of common stock, net of offering costs		3,450,000		4		—			—		232,843		—		—			232,847
Conversion of common stock Class B to Class A		189,290		—		(189,290	)		—		—		—		—			—			465,724		—		(465,724	)		—		—		—			—
Balance at September 30, 2018		23,883,965	$	24		5,813,565		$	6	$	432,273	$	—	$	(394,758	)	$	37,545
Other shareholder transactions																					—		—		—			—		107		—			107
Balance at June 30, 2019																					24,466,407	$	24		5,631,527		$	6	$	450,354	$	(483,857	)	$	(33,473	)

Nine Months Ended September 30, 2018

Common Stock A

Common Stock B

Additional
Paid-In

Shareholder
Notes

Total
Accumulated

Total
Stockholders’

Shares

Amount

Shares

Amount

Capital

Receivable

Deficit

(Deficit) Equity

Balance at December 31, 2017

19,975,340

$
20

6,166,166

$
7

$
190,145

$
(2
)

$
(337,143
)

$
(146,973
)
Net loss

—

—

—

—

—

—

(54,963
)

(54,963
)
Compensation expense
   related to stock options

—

—

—

—

7,781

—

(18
)

7,763

Exercise of options

—

—

106,024

—

1,498

—

—

1,498

Proceeds from payments of
   shareholder promissory
    notes

—

—

—

—

6

2

—

8

Public offering of common stock, net of offering costs

3,450,000

4

—

—

232,843

—

—

232,847

Conversion of common stock
   Class B to Class A

458,625

—

(458,625
)

(1
)

—

—

—

(1
)
Adoption of new accounting
   guidance

—

—

—

—

—

—

(2,634
)

(2,634
)
Balance at September 30, 2018

23,883,965

$
24

5,813,565

$
6

$
432,273

$
—

$
(394,758
)

$
37,545

	Nine Months Ended						Six Months Ended
	September 30,						June 30
	2019			2018			2020			2019
Operating activities
Net loss	$	(103,228	)	$	(54,963	)	$	(116,520	)	$	(63,534	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		659			311			562			401
Amortization of debt issuance costs		1,017			549
Amortization of debt issuance costs and implied interest								4,163			678
Non-cash interest expense on liability related to sale of future royalty								664			—
Stock-based compensation expense		14,090			7,783			34,104			8,710
Loss on extinguishment of debt		—			1,007			11,183			—
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(1,899	)		(1,304	)
Other assets		20			14
Income tax receivable								(22,218	)		—
Prepaid expenses and other current assets and other assets								(1,815	)		(2,271	)
Accounts payable		(440	)		2,933			9,355			312
Accrued direct research and other current and long-term liabilities		11,442			10,836
Accrued direct research, other current, and long-term liabilities								(4,247	)		9,802
Payable to collaborators								(150,000	)		—
Deferred revenue		(23,437	)		(13,452	)		(2,338	)		(15,539	)
Net cash used in operating activities		(101,776	)		(46,286	)		(237,107	)		(61,441	)
Investing activities
Purchases of property and equipment		(2,420	)		(370	)		(384	)		(2,092	)
Net cash used in investing activities		(2,420	)		(370	)		(384	)		(2,092	)
Financing activities
Proceeds from issuance of common stock		—			232,846
Proceeds from long-term debt		—			60,000
Payments on deferred issuance costs		—			(2,289	)
Proceeds from issuance of common stock, net								55,399			—
Payments on long-term debt								(167,170	)		—
Exercise of options		6,448			1,504			1,786			6,085
Other shareholder transactions		107			—
Proceeds from sale of future royalties, net								293,571			107
Net cash provided by financing activities		6,555			292,061			183,586			6,192
Net (decrease) increase in cash and cash equivalents		(97,641	)		245,405
Net decrease in cash and cash equivalents								(53,905	)		(57,341	)
Cash and cash equivalents at beginning of year		337,790			129,780			664,324			337,790
Cash and cash equivalents at end of period	$	240,149		$	375,185		$	610,419		$	280,449
Supplemental disclosures
Cash paid for interest	$	6,226		$	2,715		$	8,021		$	4,153
Purchases of equipment in accounts payable and other current liabilities	$	145		$	31
Accrued deferred offering cost	$	—		$	22
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations	$	8,262		$	—		$	—		$	8,981
Purchases of equipment in accounts payable, accrued direct research, other current, and long-term liabilities							$	1,448		$	170

The Company’s mission is to identify, develop, and commercialize innovative therapies that change patients’ lives for the better. The Company focuses on small-molecule therapeutics with novel mechanisms of action for the treatment of severe, life-threatening diseases with few or no approved therapies. The Company’s lead programs are in rare forms of chronic kidney disease (CKD) and a rare ~~forms~~neurological disease. The Company announced positive topline data from registrational trials for both of ~~neurological diseases. The Company’s~~its lead product candidates, bardoxolone methyl (bardoxolone) in patients with CKD caused by Alport syndrome, and omaveloxolone in patients with a neurological ~~diseases,~~disorder called Friedreich’s ataxia (FA). Both bardoxolone and omaveloxolone activate the transcription factor Nrf2 to normalize mitochondrial function, restore redox balance, and resolve inflammation. Because mitochondrial dysfunction, oxidative stress, and inflammation are features of many diseases, the Company believes bardoxolone and omaveloxolone have many potential clinical applications.

~~The Company has reported top-line efficacy~~ Reata possesses exclusive, worldwide rights to develop, manufacture and ~~safety Year 1 results from its registrational CARDINAL Phase 3 clinical trial of~~commercialize bardoxolone, omaveloxolone, and our next-generation Nrf2 activators, excluding certain Asian markets for bardoxolone in CKD caused by Alport syndrome. Alport syndrome is a rare and serious hereditary disease with no approved therapy. The trial met its primary and key secondary Year 1 endpoints. CARDINAL demonstrated a statistically significant change in the estimated glomerular filtration rate (eGFR) relativecertain indications, which are licensed to placebo after 48 weeks of treatment and in retained eGFR, which is the change in eGFR after 48 weeks of treatment and a four-week withdrawal period. Subject to discussions with regulatory authorities, the Company plans to proceed with the submission of regulatory filings for marketing approval in the United States and internationally.

The Company has reported top-line efficacy and safety results from its registrational part 2 portion of the MOXIe Phase 2 trial of omaveloxolone in Friedreich’s ataxia (FA). FA is a rare, inherited, debilitating, and degenerative neuromuscular disorder with no approved therapy. The trial demonstrated statistically significant evidence of efficacy for its primary endpoint of change in the modified Friedreich’s Ataxia Rating Scale (mFARS) relative to placebo after 48 weeks of treatment. Subject to discussions with regulatory authorities, the Company plans to proceed with the submission of regulatory filings for marketing approval in the United States and internationally.

~~The Company is also conducting two additional registrational trials: FALCON, studying bardoxolone in patients with autosomal dominant polycystic kidney disease (ADPKD)~~Kyowa Kirin Co., ~~and CATALYST, studying bardoxolone in patients with a rare and serious form of pulmonary arterial hypertension (PAH) caused by connective tissue disease (CTD-PAH)~~Ltd. (KKC). ~~The Company initiated enrollment of FALCON in May 2019, and the Company expects to have top-line data from CATALYST in mid-2020.~~

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

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~~six months ended ~~September~~June 30, ~~2019~~2020 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2019.~~2020. The consolidated balance sheet at December 31, ~~2018,~~2019, 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.

The ~~Company’s~~ significant accounting policies used in preparation of these condensed consolidated financial statements for the three and six months ended June 30, 2020 are ~~described~~consistent with those discussed in Note 2 ~~of Notes~~ to ~~Consolidated Financial Statements included~~the consolidated financial statements in ~~its~~the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018 (2018 Annual Report~~2019, except as noted below with respect to the Company’s liability related to sale of future royalties and as noted within the “Recent Accounting Pronouncements – Recently Adopted Accounting Pronouncements” section.

On June 10, 2020, the Company entered into a Development and Commercialization Funding Agreement with an affiliate of Blackstone Life Sciences, LLC (BXLS) that 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 (Development Agreement). The Company accounted for the Development Agreement as a sale of future revenues resulting in a debt classification, primarily because the Company has significant continuing involvement in generating the future revenue on which the royalties are based. The debt will be amortized under the effective interest rate method and, accordingly, the Company is recognizing non-cash interest expense over the estimated term of the Development Agreement. The liability related to sale of future royalties, and the debt amortization, are based

on ~~Form 10-K). During~~ the ~~first quarter~~Company’s current estimate of ~~2019,~~future royalties expected to be paid over the ~~Company adopted Accounting Standards Update (ASU) No. 2016-02,~~ ~~Leases~~ ~~(Topic 842). As a result~~estimated term of the ~~adoption of Topic 842,~~Development Agreement. The Company will periodically assess the ~~Company has updated~~expected royalty payments and, if materially different than its ~~Leases accounting policies.~~previous estimate, will prospectively adjust and recognize the related non-cash interest expense. ~~There were no other changes~~The transaction costs associated with the liability will be amortized to ~~its significant accounting policies from those disclosed~~non-cash interest expense over the estimated term of the Development Agreement. See Note 5, Liability Related to Sale of Future Royalties, of Notes to Consolidated Financial Statements contained in ~~its 2018 Annual~~this Quarterly Report on Form ~~10-K.~~10-Q.

AsThe Company categorizes its financial instruments measured at fair value into a three-level fair value hierarchy that prioritizes the inputs used in determining the fair value of ~~September 30, 2019,~~ the ~~Company had cash and cash equivalents~~asset or liability. The three levels of ~~$240,149,000.~~ the fair value hierarchy are as follows:

The Company has ~~experienced losses and negative operating cash flows for many years since inception and has no marketed drug or other products. The Company’s ability~~determined the fair value of the liability related to ~~generate~~the sale of future ~~revenue depends upon the results of its development programs, the success of which cannot be guaranteed.~~

~~The Company expects its current cash and its access to additional equity or debt funding will enable it to meet its current obligations through December 31, 2020. See Note 9,~~ ~~Subsequent Events~~.

~~At the inception of an arrangement, the Company determines if an arrangement~~royalties is ~~or contains, a lease~~ based on the ~~unique facts and circumstances present in that arrangement. Lease assets represent the~~ Company’s ~~right~~current estimates of future royalties expected to ~~use an underlying asset for the lease term, and lease liabilities represent the obligation~~be paid to ~~make lease payments arising from the lease. These assets and liabilities are initially recognized at the lease commencement date based on the present value of lease payments~~BXLS, over the lease term calculated using its incremental borrowing rate based on the information available at commencement unless the implicit rate is readily determinable. Lease assets also include upfront lease payments, lease incentives paid, and direct costs incurred and exclude lease incentives received. The lease term used to calculate the lease assets and related lease liabilities includes the options to extend or terminate the lease when it is reasonably certain that the Company will exercise those options. Lease expense for operating leases is recognized on a straight-line basis over the expected lease term as an operating expense while the expense for finance leases is recognized as depreciation expense over the expected lease term unless there is a transfer of title or purchase option reasonably certain of exercise.

~~The Company will account for each lease component separately from the nonlease components. The depreciable~~ life of ~~lease assets and leasehold improvements is limited by~~ the ~~expected lease term unless there is a transfer~~arrangement, which are considered Level 3. See Note 5, Liability Related to Sale of ~~title or purchase option reasonably certain~~Future Royalties, of ~~its exercise.~~

~~Leases with an initial term of 12 months or less are not recorded~~Notes to Consolidated Financial Statements contained in this Quarterly Report on ~~the balance sheet, and the expenses for these short-term leases and operating leases are recognized on a straight-line basis over the lease term.~~Form 10-Q.

The Company is an emerging growth company (EGC), as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has irrevocably elected not to avail itself of this exemption from new or revised accounting standards, and, therefore, will be subject to the same new or revised accounting standards as public companies that are not emerging growth companies. The Company will remain an EGC until December 31, 2019.

In February 2016, the Financial Accounting Standards Board (FASB) issued Topic 842, amended by ASU 2018-11, Leases (Topic 842): Targeted ~~Improvements~~.Improvements. The new guidance requires a lessee to recognize assets and liabilities for all leases with lease terms of more than 12 months and provide additional disclosures. Topic 842 requires adoption using a modified retrospective transition approach with either 1) transition provisions at the beginning of the earliest comparative period ~~records~~with its cumulative adjustment recognized to retained earnings at the beginning of the earliest period presented or 2) a cumulative-effect adjustment recognized to the opening balance of retained earnings on the adoption. We adopted this standard on January 1, 2019, using the cumulative-effect adjustment approach. We elected the package of practical expedients in transition for leases that commenced prior to January 1, 2019 whereby these contracts were not reassessed or reclassified from their previous assessment as of December 31, 2018.

As a result of implementing Topic 842, the Company recognized an operating lease right-of-use asset of $1,544,000 and an operating lease liability of $1,659,000 on January 1, 2019, with no impact on its beginning retained earnings, consolidated statements of operations, or cash flows. See Note 5, ~~Leases, for further details.~~

~~In July 2018, the FASB issued ASU No. 2018-09,~~ ~~Codification Improvements~~ (ASU 2018-09). This ASU provided various minor codification updates and improvements to address comments that the FASB had received regarding unclear or vague accounting guidance. The guidance is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within that fiscal year. The adoption of this guidance did not have a material impact on our financial position, results of operations or disclosures.

~~In July 2019,~~ ~~the FASB issued ASU No. 2019-07,~~ ~~Codification Updates to SEC Sections~~. The ASU clarifies or improves the disclosure and presentation requirements of a variety of codification topics by aligning them with the SEC’s regulations, thereby eliminating redundancies and making the codification easier to apply. The guidance is effective upon issuance. ~~The adoption of this guidance did not have a significant impact on~~ ~~the Company’s reported consolidated financial results.~~

In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements~~(Topic~~ (Topic 808) (ASU 2018-18). This update provides clarification on the interaction between Revenue ~~Recognition~~from Contracts with Customers (Topic 606) and Collaborative Arrangements (Topic 808) including the alignment of unit of account guidance between the two topics. This update is effective in fiscal years, including interim periods, beginning after December 15, ~~2020,~~2019, and early adoption is permitted. The Company ~~is evaluating the~~adopted this standard on January 1, 2020 and its adoption did not have a material impact on ~~its~~the Company’s consolidated financial statements and related disclosure.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This update requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to defer and recognize as an asset. This guidance should be applied either retrospectively or prospectively to all implementation costs incurred after the date of ~~adopting~~adoption. The Company adopted this ~~guidance.~~standard on January 1, 2020 and its adoption did not have material impact to the Company’s consolidated financial statements and related disclosure.

In September 2010, the Company entered into a license agreement with AbbVie Inc. (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 ~~Inc. (AbbVie)~~ (the AbbVie Collaboration Agreement) to jointly research, develop, and commercialize the Company’s portfolio of second and later generation oral Nrf2 activators. The terms of the Collaboration Agreement include payment to the Company of a nonrefundable, up-front payment of $400,000,000. The Company is also participating with AbbVie on joint steering committees.

The up-front payment and the Company’s collaboration on research, development, and commercialization are accounted for as a single unit of accounting. Revenue is being recognized ratably through December 2026, which is the estimated minimum period that is needed to complete the performance obligations under the terms of the Collaboration Agreement. The Company began recognizing revenue related to the up-front payment upon execution of the Collaboration Agreement. During the three months ended September 30, 2019 and 2018, the Company recognized approximately $6,717,000, and during the nine months ended September 30, 2019 and 2018, recognized $19,931,000, as collaboration revenue. As of September 30, 2019, the Company recorded deferred revenue totaling approximately $191,714,000 of which approximately $26,720,000 is reflected as the current portion of deferred revenue.

On October 9, 2019, the Company and AbbVie entered into an Amended and Restated License Agreement (the ~~Amended AbbVie~~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 ~~dated~~and the AbbVie Collaboration Agreement. In exchange for such rights, the Company agreed to pay AbbVie $330.0 million, of which $100.0 million was paid as of ~~September 21, 2010, which~~December 31, 2019, $150.0 million was paid on June 30, 2020, and $80.0 million will be payable on November 30, 2021. Additionally, the Company ~~entered into~~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 Company recognized interest expense related to the Reacquisition Agreement of approximately $1.6 million and $0 million, during the three months ended June 30, 2020 and 2019, respectively, and $3.2 million and $0 million, during the six months ended June 30, 2020 and 2019, respectively. As of June 30, 2020, the Company’s payable to collaborators was $80.0 million, with a present value of $70.1 million.

The execution of the Reacquisition Agreement ended our performance obligations under the AbbVie ~~(the License Agreement),~~Collaboration Agreement and included the write off of the remaining related deferred revenue balance, after which no further revenue was recognized. Accordingly, there was 0 revenue recognized in 2020. The Company recognized revenue related to the AbbVie Collaboration ~~Agreement. See Note 9,~~ ~~Subsequent Events~~.Agreement totaling approximately $6.6 million and $13.2 million during the three and six months ended June 30, 2019, respectively. The deferred revenue balance was $0 million as of June 30, 2020.

In December 2009, the Company entered ainto an exclusive license ~~agreement~~ with ~~Kyowa Kirin Co., Ltd. (KKC)~~KKC (the KKC Agreement)~~, which granted KKC an exclusive license~~ to develop and commercialize bardoxolone in the licensed territory. The Company received a nonrefundable, up-front license fee of ~~$35,000,000~~$35.0 million in 2009 and regulatory milestones totaling ~~$45,000,000~~$45.0 million in 2010, 2012, and 2018 and could receive additional regulatory milestones of ~~$52,000,000~~$52.0 million and commercial milestones of ~~$140,000,000,~~$140.0 million, as well as 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 KKC in the licensed territory.

The up-front payment and regulatory milestones are accounted for as a single unit of accounting. Revenue is being recognized ratably through December 2021, which is the estimated minimum period that is needed to

complete the deliverables under the terms of the KKC Agreement. The Company began recognizing revenue related to the up-front payment upon execution of the KKC Agreement. ~~During~~The Company recognized collaboration revenue totaling approximately $1.2 million during each of the three months ended ~~September~~June 30, 2020 and 2019 and ~~2018,~~$2.3 million during each of the ~~Company recognized approximately $1,181,000 and $(2,951,000), respectively, and during the nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018, recognized $3,506,000 and $23,521,000, respectively, as collaboration revenue.~~2019. As of ~~September~~June 30, ~~2019,~~2020, the Company recorded deferred revenue totaling approximately ~~$10,570,000~~$7.1 million of which approximately ~~$4,701,000~~$4.7 million is reflected as the current portion of deferred revenue.

On June 14, 2018, the Company entered into an Amended and Restated Loan and Security Agreement (the Restated Loan Agreement) with Oxford Finance LLC and Silicon Valley Bank (collectively, the Lenders), which amended and restated the Loan and Security Agreement entered into among Reata and the Lenders on March 31, 2017, as amended on November 3, 2017 (the Loan Agreement).

Under the Restated Loan Agreement, the Term A Loan was increased to $80,000,000, and the Term B Loan availability was increased to $45,000,000, available to be drawn within 30 days, but no later than December 31, 2019, after the achievement of one of two milestones. If the Company is entitled to draw the Term B Loan but does not draw the Term B Loan by December 31, 2019, the Company is obligated to pay a non-utilization fee of $450,000.

All outstanding Term Loans will mature on June 1, 2023. Under the Term A Loan, the Company will make interest-only payments for 24 months through June 1, 2020; however, if the Company draws the Term B Loan, the Company will make interest-only payments for 36 months through June 1, 2021. The interest-only payment period will be followed by 36 equal monthly payments, or 24 equal monthly payments if the Company draws the Term B Loan, of principal and interest payments. The Term Loans will bear interest at a floating per annum rate calculated as 7.79% plus the greater of the 30-day U.S. Dollar LIBOR rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue or 1.91%, with a minimum rate of 9.7% and maximum rate of 12.29%.

The Company has the option to prepay all, but not less than all, of the borrowed amounts, provided that the Company will be obligated to pay a prepayment fee equal to (a) the aggregate amount of interest that the Company would have paid through the maturity date if prepayment is made on or before the first anniversary of the applicable funding date of the Term Loan, (b) 4.0% of the outstanding principal balance of the applicable Term Loan if prepayment is made after the first anniversary date and on or before the second anniversary of the applicable funding date, (c) 3.0% of the outstanding principal balance of the applicable Term Loan if prepayment is made after the second anniversary date and on or before the third anniversary of the applicable funding date, or (d) 1.5% of the outstanding principal balance of the applicable Term Loan if prepayment is made after the third anniversary date and on or before the fourth anniversary of the applicable funding date. The Company will also be required to make a final exit fee payment of 6.5% of the principal balance of the Term A Loan and 4.0% of the Term B Loan, payable on the earliest of the prepayment of the Term Loans, acceleration of any Term Loan, or at maturity of the Term Loans. As of September 30, 2019, the Term A Loan has an effective interest rate of 10.71% before debt issuance costs and final exit fee and 13.26% including debt issuance costs and final exit fee. The Company was in compliance with all covenants under the Restated Loan Agreement as of September 30, 2019.

The Company may use the proceeds from the Term Loans for working capital and to fund its general business requirements. The Company’s obligations under the Restated Loan Agreement are secured by substantially all of its current and future assets, including its owned intellectual property.

~~The future principal payments by fiscal year for the Company’s Term A Loan:~~

On October 9, 2019, the Company entered into the First Amendment to the Amended and Restated Loan and Security Agreement (the ~~Amendment)~~Amended Restated Loan Agreement). Under the Amended Restated Loan Agreement, the Term A Loan principal amount was $80.0 million, and the Term B Loan availability was increased from $45.0 million to $75.0 million (collectively with the ~~Lenders,~~Term A Loan, the Term Loans). On December 20, 2019, the Company borrowed $75.0 million under the Term B Loan resulting in a principal balance of the Term Loans of $155.0 million.

On June 24, 2020, the Company paid off the total outstanding balance of the Term Loans prior to the maturity date. The payoff consisted of (i) the outstanding principal balance of $155.0 million, (ii) exit fees of $6.7 million, which ~~amended~~has been partially accrued up to the date of repayment, (iii) prepayment fees of $5.4 million, and (iv) accrued and unpaid interest of $1.0 million. At the time of payoff, all liabilities and obligations under the Amended Restated Loan Agreement were terminated. In connection with the payoff of the Term Loans, the Company recorded a loss on extinguishment of debt of $11.2 million in the three and six months ended June 30, 2020.

On June 24, 2020, the Company closed on the Development Agreement with BXLS. 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 KKC. 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.

In addition, concurrent with the Development Agreement, the Company entered into a common stock purchase agreement (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 2 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 $294.2 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. ~~See Note 9,~~ ~~Subsequent Events~~The effective interest rate under the Development Agreement, including transaction costs, is approximately 13.7%.

5.The following table shows the activity within the liability related to sale of future royalties for the six months ended June 30, 2020:

	Three Months Ended						Six Months Ended
	June 30						June 30
	2020			2019			2020			2019
Other income (expense), net
Investment income	$	501		$	1,705		$	2,555		$	3,502
Interest expense		(5,644	)		(2,413	)		(11,512	)		(4,810	)
Non-cash interest expense on liability related to sale of future royalty		(664	)		—			(664	)		—
Other income (expense)		—			7			—			7
Loss on extinguishment of debt		(11,183	)		—			(11,183	)		—
Total other income (expense), net	$	(16,990	)	$	(701	)	$	(20,804	)	$	(1,301	)

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

Interest expense consists primarily of interest on our borrowing activities under our loan agreements and the imputed interest from 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 and sales of assets.

In June 2020, the Company paid off the Term Loans and recorded a loss on the extinguishment of debt of $11.2 million, which consisted primarily of prepayment fees, exit fees and unamortized debt issuance costs.

The ~~Company has offices~~Company’s headquarters are located ~~in Irving, Texas, where it leases approximately 34,890 square feet of office and laboratory space, and~~ in Plano, Texas, where it leases approximately 122,000 square feet of office space. The Company leases additional office and laboratory space of approximately 34,890 square feet located in Irving, Texas. The lease terms for the Irving and Plano offices extend through October 31, 2022 with an option to renew up to six months and through April 30, 2022 with four successive three-month-period renewal options, respectively.

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 Lease Agreement), and at the Company’s ~~leases~~option, it may renew the lease for two consecutive five-year renewal periods or one ten-year renewal period. The Company does not have ~~remaining contractual terms~~control of the space or the construction prior to completion of construction. Therefore, 0 right-of-use or lease liabilities were recorded in connection with the Lease Agreement as of June 30, 2020. Under the First Amendment to the Lease Agreement executed in May 2020, the landlord will fund the Company’s leasehold improvements up to $31.3 million, of which the Company has recorded a leasehold incentive obligation of approximately ~~33 months, which includes the options to extend the leases for up to one year. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.~~$1.7 million as other long-term liabilities as of June 30, 2020.

At ~~September~~June 30, ~~2019,~~2020, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating leases held by the Company were ~~8.3%~~9.6% and ~~2.5~~2.3 years, respectively. During the ~~nine~~three and six months ended ~~September~~June 30, ~~2019,~~2020, cash paid for amounts included for the measurement of lease liabilities was ~~$1,667,000.~~$1.0 million and $1.9 million, respectively. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 the Company recorded operating lease expense of ~~$911,000~~$1.0 million and ~~$2,489,000,~~$1.9 million, respectively. The Company has elected to net the amortization of the right-of-use assets and the reduction of the lease liabilities principal in accrued direct research and other current and long-term liabilities in the consolidated statements of cash flows.

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

Balance Sheet Classification

As of September 30, 2019

Balance Sheet Classification

As of June 30, 2020

(in thousands)

Non-current right-of-use assets

Other assets

8,262

Other assets

7,653

Current lease liabilities

Other current liabilities

2,941

Other current liabilities

3,452

Non-current lease liabilities

Other long-term liabilities

6,198

Other long-term liabilities

5,212

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

	As of September 30, 2019			As of June 30, 2020
	(in thousands)			(in thousands)
2019 (remaining three months)	$	718
2020		3,999
2020 (remaining six months)				$	2,063
2021		4,090			4,142
2022		1,178			3,500
Total lease payments		9,985			9,705
Less: Imputed interest		(846	)		(1,041	)
Present value of lease liabilities	$	9,139		$	8,664

On ~~October 15, 2019,~~March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). The CARES Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and to provide assistance to individuals, families, and businesses affected by COVID-19. Accordingly, under its provisions, for the six months ended June 30, 2020, the Company ~~entered into~~recognized a ~~lease agreement, relating~~tax benefit and receivable of $22.1 million associated with the ability to carryback an applicable prior year’s net operating losses to a preceding year to generate a refund.

For the ~~lease~~three months ended June 30, 2020, the Company’s effective tax rate was a benefit of ~~approximately 327,400 square feet of office and laboratory space located in Plano, Texas (Lease Agreement). See Note 9,~~ ~~Subsequent Events.~~

0.0% compared to 0.0% for the three months ended June 30, 2019. The Company’s effective tax rate for the three months ended June 30, 2020 varies with the statutory rate primarily due to valuation allowances on deferred taxes. For the six months ended June 30, 2020, the Company’s effective tax rate was a benefit of 16.0% compared to 0.0% for the six months ended June 30, 2019. The Company’s effective tax rate for the six months ended June 30, 2020 varies with the statutory rate primarily due to the favorable impact ~~of nondeductible stock-based compensation~~associated with the CARES Act and ~~the~~ changes in the valuation allowance related to certain deferred tax assets generated or utilized in the applicable period. The Company’s deferred tax assets have been fully offset by a valuation allowance at ~~September~~June 30, ~~2019,~~2020, and the Company expects to maintain this valuation allowance until there is sufficient evidence that future earnings can be achieved, which is uncertain at this time.

The IRS examination team has completed its examination of the Company’s 2013, 2014, and 2015 U.S. tax returns and proposed adjustments with respect to certain items that were reported by the Company for the 2013 tax year. In June 2018, the Company received the Revenue Agent Report from the IRS. The Company believes that it has accurately reported all amounts in its tax returns and has submitted an administrative protest with the IRS contesting the examination team’s proposed adjustments. The Company intends to vigorously defend its reported positions and believes the ultimate resolution of the adjustments proposed by the IRS examination team will not have a material adverse effect on its consolidated financial statements.

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

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30				Six Months Ended June 30
	2019		2018		2019		2018		2020		2019		2020		2019
	(in thousands)								(in thousands)
Research and development	$	1,885	$	988	$	5,235	$	2,924	$	7,527	$	1,659	$	19,044	$	3,350
General and administrative		3,495		1,757		8,855		4,859		7,269		2,824		15,060		5,360
	$	5,380	$	2,745	$	14,090	$	7,783	$	14,796	$	4,483	$	34,104	$	8,710

The following table summarizes ~~stock option activity~~RSUs as of ~~September~~June 30, ~~2019, and changes during the nine months ended September 30, 2019,~~2020, under the Second Amended and Restated Long Term Incentive Plan (LTIP Plan) agreement and standalone option agreements:

Number of Options

Weighted-Average
Exercise Price

Outstanding at January 1, 2019

3,320,571

21.20

Granted

1,624,133

64.94

Exercised

(395,641
)

16.30

Forfeited

(276,306
)

34.42

Outstanding at September 30, 2019

4,272,757

37.51

Exercisable at September 30, 2019

1,743,886

22.56

	Number of RSUs		Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2020		50,000	$	72.70
Granted		24,751	$	184.00
Vested		—	$	—
Forfeited		—	$	—
Outstanding at June 30, 2020		74,751	$	109.55

As of June 30, 2020, the performance targets for the performance-based RSUs have not been met. Accordingly, the fair value related to these performance-based RSUs of approximately $4.2 million has not been recognized. During the quarter ended June 30, 2020, the Company recognized $0.3 million in compensation expense related to time-based RSUs.

The following table summarizes stock option activity as of June 30, 2020, and changes during the six months ended June 30, 2020, under the LTIP and standalone option agreements:

Stock-based compensation expense for the three and six months ended June 30, 2020, included accelerated recognition of expense due to modifications of outstanding stock options as a result of the death of an executive and employees who entered into consulting agreements at the termination of employment, which were considered to be non-substantive services. Accordingly, the Company recognized $2.9 million and $10.0 million for the three and six months ended June 30, 2020, respectively.

As of June 30, 2020, the Company has approximately 303,000 shares of performance-based stock options for which the performance targets have not been met. Accordingly, the fair value related to these performance-based stock options of approximately $34.1 million has not been recognized.

The total intrinsic value of all outstanding options and exercisable options at ~~September~~June 30, ~~2019~~2020 was ~~$184,473,000~~$448.7 million and ~~$100,782,000,~~$278.2 million, respectively.

As of September 30, 2019, the Company granted 50,000 RSUs under a Restricted Stock Unit Agreement. As the awards granted are performance-based, there was $3,635,000 of unrecognized compensation expense related to these RSUs.

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30						Six Months Ended June 30
	2019			2018			2019			2018			2020			2019			2020			2019
	(in thousands, except share and per share data)												(in thousands, except share and per share data)
Numerator
Net loss	$	(39,694	)	$	(30,835	)	$	(103,228	)	$	(54,963	)	$	(67,581	)	$	(34,380	)	$	(116,520	)	$	(63,534	)
Denominator
Weighted-average number of common shares used in net loss per share – basic		30,110,391			28,704,853			30,004,211			27,022,269			33,265,778			30,069,048			33,243,931			29,950,241
Dilutive potential common shares		—			—			—			—			—			—			—			—
Weighted-average number of common shares used in net loss per share – diluted		30,110,391			28,704,853			30,004,211			27,022,269			33,265,778			30,069,048			33,243,931			29,950,241
Net loss per share – basic	$	(1.32	)	$	(1.07	)	$	(3.44	)	$	(2.03	)	$	(2.03	)	$	(1.14	)	$	(3.51	)	$	(2.12	)
Net loss per share – diluted	$	(1.32	)	$	(1.07	)	$	(3.44	)	$	(2.03	)	$	(2.03	)	$	(1.14	)	$	(3.51	)	$	(2.12	)

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 ~~4,272,757~~4,793,680 and ~~3,337,262~~3,845,874 shares ~~for the nine months ended September 30, 2019 and 2018, respectively.~~

~~On October 9, 2019, the Company and AbbVie entered into the~~ ~~Amended AbbVie~~ 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 License Agreement and the Collaboration Agreement. Except as ~~otherwise set forth in the~~ ~~Amended AbbVie~~ ~~Agreement, the other provisions~~ of ~~the License Agreement and the Collaboration Agreement have been terminated. Under the~~ ~~Amended AbbVie~~ Agreement, certain licenses granted to AbbVie will continue, for which AbbVie has granted exclusive sublicenses to the Company, resulting in its reacquiring worldwide rights to bardoxolone, excluding certain Asian countries that the Company previously licensed to KKC, and worldwide rights to omaveloxolone and the other second-generation Nrf2 activators (the Second-Generation Activators), in each case that the Company had licensed to AbbVie under the License Agreement and the Collaboration Agreement. In exchange, the Company will pay AbbVie $330,000,000, of which $75,000,000 is payable on December 8, 2019, $150,000,000 is payable on June 30, 2020 and $105,000,000 is payable on November 30, 2021. If the Company raises cash proceeds of $200,000,000 or more in one or more equity offerings, it is required to prepay AbbVie $25,000,000, which prepayment will reduce the amount payable to AbbVie on November 30, 2021, from $105,000,000 to $80,000,000. The Company also will pay AbbVie an escalating, low single-digit royalty on worldwide net sales, on a product-by-product basis, of omaveloxolone and an identified list of existing Second-Generation Activators. By reacquiring its rights, the Company was relieved from its obligations under the License Agreement and the Collaboration Agreement.

~~On October 9,~~ 2019, ~~the Company entered into the~~ ~~Amendment~~ with the Lenders, which amended the Restated Loan Agreement entered into among Reata and the Lenders on June 14, 2018. Under the Amendment, the Term B Loan availability was increased from $45,000,000 to $75,000,000 and the availability period was increased from within 30 days to 60 days after the achievement of the one of two milestones. As one of the milestones was achieved on October 14, 2019, the availability period will end on December 13, 2019.

Under the Restated Loan Agreement, the Company has significantly increased its current obligations, but the Company believes that its current cash, along with its access to additional equity or debt funding, will enable the Company to meet its current obligations through December 31, 2020.

On October 15, 2019, the Company entered into the Lease Agreement, relating to the lease of approximately 327,400 square feet of office and laboratory space located in Plano, Texas. The term of the Lease is estimated to commence mid-2022, when construction is completed, and continue for 16 years, with up to 10 years of extension at the Company’s option. The initial annual base rent will be determined based on the project cost, subject to an initial annual cap of approximately $13,344,000, which may increase in certain circumstances. Beginning in the third lease year, the base rent will increase 1.95% per annum each year. In addition to the annual base rent, the Company will pay for taxes, insurance, utilities, operating expenses, assessments under private covenants, maintenance and repairs, certain capital repairs and replacements, and building management fees.

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 heading “Risk Factors” and discussed elsewhere in this Quarterly Report on Form 10-Q.

We are a ~~clinical stage~~clinical-stage biopharmaceutical company focused on identifying, developing, and commercializing innovative therapies that change patients’ lives for the better. We concentrate on small-molecule therapeutics with novel mechanisms of action for the treatment of severe, life-threatening diseases with few or no approved therapies. Our lead programs are in rare forms of ~~CKD~~chronic kidney disease (CKD) and a rare ~~forms of~~ neurological disease. ~~The Company’s~~We have announced positive topline data from registrational trials for both of our lead product candidates, bardoxolone methyl (bardoxolone) in patients with CKD caused by Alport syndrome and omaveloxolone in patients with a neurological ~~disease,~~disorder called Friedreich’s ataxia (FA). Both bardoxolone and omaveloxolone activate the transcription factor Nrf2 to normalize mitochondrial function, restore redox balance, and resolve inflammation. Because mitochondrial dysfunction, oxidative stress, and inflammation are features of many diseases, we believe bardoxolone and omaveloxolone have many potential clinical applications. We possess exclusive, worldwide rights to develop, manufacture, and commercialize bardoxolone, omaveloxolone, and our next-generation Nrf2 activators, excluding certain Asian markets for bardoxolone in certain indications, which are licensed to KKC.

Following the announcement of positive, year one data from the Phase 3 ~~portion of the~~ CARDINAL study of bardoxolone in patients with CKD caused by Alport syndrome ~~met its primary~~in November 2019, we have been engaged in discussions with the U.S. Food and ~~key secondary~~Drug Administration (FDA) regarding the Year 1 ~~endpoints. After 48 weeks of treatment, patients treated with bardoxolone~~efficacy and safety results. We have had a ~~statistically significant improvement~~Type C meeting where the FDA expressed concerns with basing an NDA for accelerated approval on the Year 1 data and recommended that we consider submitting the NDA with Year 2 data based, in part, on the assumption that there would not be much delay in NDA submission. Following the Type C meeting, we provided written responses, and engaged in follow up informal meetings, that we believe addressed the FDA comments regarding the Year 1 results. Accordingly, we recently requested and were granted a pre-NDA meeting by the FDA to discuss the NDA submission content and plans.

Our plan has been, and continues to be, to submit the NDA for bardoxolone in Alport syndrome during fourth quarter of 2020 for accelerated approval based on the one-year data from the Phase 3 portion of CARDINAL. If the second-year results are available during an acceptable time frame, we may be able to submit the second-year data to the NDA during the review process and before the FDA makes a determination about accelerated approval. This may extend the PDUFA date, but could also result in consideration of full approval, rather than accelerated approval. Alternatively, the FDA could recommend that we wait for the second-year data from CARDINAL to file the NDA. This would permit us to file for full approval but would delay the filing until the first quarter of 2021 compared to ~~placebo~~our current guidance of filing by the end of this year. This timing assumes that we can complete the activities necessary to provide the Year 2 data to the FDA on a timely basis and is, of course, subject to uncertainty resulting from the COVID-19 pandemic. As a result of the measures taken in ~~mean eGFR of 9.50 mL/min/1.73 m~~² ~~(p<0.0001). After 48 weeks of treatment~~response to the pandemic, and ~~a four-week withdrawal period, patients treated with bardoxolone had a statistically significant improvement compared to placebo in mean retained eGFR of 5.14 mL/min/1.73 m~~^{based on current operational metrics, at this time we believe that the timeline for Year 2} ~~(p=0.0012). Bardoxolone treatment was generally reported~~ data availability is unlikely to be ~~well-tolerated and showed a similar safety profile to~~affected by COVID-19.

Following the ~~Phase 2 portion~~announcement of the ~~CARDINAL study. Based on these~~ positive ~~results, and~~data from the MOXIe Part 2 study in October 2019, we have planned, subject to ~~discussions~~discussion with regulatory authorities, ~~the Company plans~~ to proceed with ~~the~~a submission ~~of regulatory filings for marketing approval in the United States and internationally.~~

On October 14, 2019, we announced that the registrational Part 2 portion of the MOXIe Phase 2 trial of omaveloxolone in patients with FA met its primary endpoint of change in mFARS relative to placebo after 48 weeks of treatment. Patients treated with omaveloxolone (150 mg/day) demonstrated a statistically significant, placebo-corrected 2.40 point mean improvement (decrease) in mFARS after 48 weeks of treatment (p=0.014). Omaveloxolone treatment was generally reported to be well-tolerated. Based on these positive results, and subject to discussions with regulatory authorities, the Company plans to proceed with the submission of regulatory filings for marketing approval of

omaveloxolone for the treatment of FA in the United ~~States~~States. We recently completed a Type C meeting in which the FDA provided us with guidance that it does not have any concerns with the reliability of the modified Friedreich’s Ataxia Rating Scale (mFARS) primary endpoint results in the MOXIe Part 2 study. Nevertheless, the FDA is not convinced that the MOXIe Part 2 results will support a single study approval without additional evidence that lends persuasiveness to the results. In preliminary comments for the meeting, the FDA stated that we will need to conduct a second pivotal trial that confirms the mFARS results of the MOXIe Part 2 study with a similar magnitude of effect.

In response to the preliminary comments, the Friedreich’s Ataxia Research Alliance (FARA), key FA clinicians, and ~~internationally.~~we provided the FDA with information to demonstrate that it will be difficult to conduct an additional, prospective clinical trial in FA because of the very slow progression rate of FA, the limited number of FA patients available for clinical research, the small number of clinical trial investigators who can conduct the mFARS exam, and the impact of the COVID-19 pandemic on the ability to conduct neuroscience clinical trials. Thus, conducting an additional pivotal study would result in a long delay in the availability of a potentially effective therapy to patients with a progressive, life-threatening disease with no treatment options. The FDA acknowledged the unmet need of patients with FA, 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. The FDA also acknowledged that launching a new, neuroscience clinical trial now may not be possible because of the COVID-19 pandemic.

WeAt the Type C meeting, to address the FDA’s requirement, FARA, key opinion leaders, and Reata proposed a second study (the “crossover study”) to provide additional evidence of effectiveness. The study would measure the effect of omaveloxolone on mFARS in patients who were previously randomized to placebo in the MOXIe Part 2 study and are ~~also conducting two~~being treated with omaveloxolone in the MOXIe open-label extension study. The FDA acknowledged that a study like the proposed crossover study could provide important additional ~~registrational trials:~~ information and asked us to submit a design for the crossover study for their consideration.

If the FDA accepts this approach, we expect to complete the crossover study as early as the fourth quarter of this year. Assuming that the FDA views the crossover study data as sufficiently positive to provide confirmatory evidence, our plan would be to submit an NDA during the first quarter of 2021. If the FDA rejects the proposal or if the data are not supportive, we will evaluate whether it is feasible to conduct a second pivotal study in FA patients as suggested by the FDA. Regardless of the interaction with the FDA, we plan to pursue marketing approval outside of the United States.

On June 24, 2020, we closed a Development and Commercialization Funding Agreement (Development Agreement) with an affiliate of Blackstone Life Sciences, LLC (BXLS) that 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. The Development Agreement includes a $300 million payment by the Blackstone affiliate in return for various percentage royalty payments on worldwide net sales of bardoxolone by Reata and its licensees, other than KKC. 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.

In addition, affiliates of BXLS paid us an aggregate of $50.0 million to purchase an aggregate of 340,793 shares of our Class A common stock, par value $0.001 per share, at $146.72 per share.

In connection with the closing of the Development Agreement, we fully paid off our senior loan with Oxford Finance LLC and Silicon Valley Bank that included $155.0 million in principal and $12.1 million in exit and prepayment fees.

In March 2020, we temporarily paused enrollment of new patients in the global Phase 3 FALCON trial of bardoxolone in patients with ADPKD due to the emergence of COVID-19 as a global public health threat. We expect to enroll a total of approximately 300 patients worldwide. We began to lift the screening hold in FALCON in June 2020, and ~~CATALYST, studying~~currently, all sites are able to screen patients and approximately half are able to randomize patients. The first patients have now reached the second year of the trial. The measures we implemented to the conduct of FALCON in response to COVID-19 have been effective, and we anticipate no meaningful impact on data integrity due to COVID-19.

Beginning in the first quarter of 2020, in accordance with recommendations from local, state, and national health authorities, we implemented and continue to enforce work-from-home measures and additional safety protocols to protect employees and the broader community and to ensure business continuity. These measures include restricting on-site staff to only those required to execute their job responsibilities and limiting the number of staff working in our research and development laboratory. We also continue to limit in-person meetings and business travel. We will continue to monitor this dynamic situation closely and will take additional measures as required to preserve the safety of our employees and the broader community.

The Phase 3 CARDINAL trial of bardoxolone in patients with CKD caused by Alport syndrome is fully enrolled and ongoing. As previously announced, we are in the process of completing the Year 2 portion of our CARDINAL Phase 3 study. As COVID-19 emerged as a ~~rare~~pandemic with serious public health implications during the first quarter of 2020, we undertook a series of measures to protect the health and ~~serious form~~safety of ~~CTD-PAH.~~patients and health care workers involved in our ongoing clinical studies, while maintaining the conduct of our studies in accordance with guidance provided by the FDA and the European Medicines Agency. For example, we have implemented the use of at-home visits as an alternative to in-clinic visits when necessary to collect blood draws and to assess patient safety. We ~~initiated enrollment~~also arranged for home delivery of the study drug to patients.

At this time, approximately 60% of the 157 patients randomized to the CARDINAL Phase 3 cohort have completed the Year 2 final off-treatment visit. The last study visits are anticipated to occur during the fourth quarter of 2020, which is consistent with our pre-COVID-19 timeline. Currently, almost all sites are allowing on-site or remote monitoring.

Patients who participated in ~~FALCON~~the CARDINAL study may be eligible to enroll in ~~May 2019.~~an open-label extension study known as EAGLE. We ~~completed enrollment of CATALYST and expect to have top-line data in mid-2020. We have received orphan drug designation from the United States Food and Drug Administration (FDA) for bardoxolone~~are implementing procedures for the ~~treatment~~conduct of ~~Alport syndrome, PAH,~~EAGLE that are similar to those being used in CARDINAL to ensure continued access to bardoxolone and ~~ADPKD and for omaveloxolone~~appropriate safety monitoring.

The MOXIe Part 2 trial was completed prior to the onset of the COVID-19 pandemic. Patients who participated in MOXIe Part 1 or 2 were eligible to enroll in an open-label extension portion of the study. We are implementing procedures for the ~~treatment~~conduct of ~~FA.~~the MOXIe extension study that are similar to those being used in our other ongoing studies to ensure continued access to omaveloxolone and appropriate safety monitoring.

Researchers at NYU Grossman School of Medicine (NYU) are initiating an Investigator-Sponsored Trial (IST), known as BARCONA, to study the effect of bardoxolone in patients suffering from COVID-19. Serious complications of COVID-19 are caused by excessive, systemic inflammation, which can result in dysfunction of the lungs, kidneys, and other organs. Acute kidney injury has been reported to occur in up to 28% of all hospitalized COVID-19 patients, and in up to 72% of patients who do not survive COVID-19. Bardoxolone and its analogs have demonstrated anti-inflammatory activity in animal models of acute lung and kidney injury, have increased survival in models of systemic inflammation, suppress replication of several types of viruses and have shown improvements in kidney function in multiple clinical trials that enrolled over 3,000 patients with various forms of chronic kidney disease.

The ~~chart below~~Phase 2 BARCONA study is a ~~summary~~randomized, placebo-controlled, double-blind trial that will enroll 40 patients with a primary endpoint of safety and treatment duration of up to 29 days in hospitalized patients. Major exclusion criteria include patients who are intubated and on invasive mechanical ventilation for three or more days, prior hospitalization for heart failure, or estimated glomerular filtration rate (eGFR) <30 ml/min/1.73 m². To further mitigate any safety risk, enrollment will be paused after enrollment of the initial five patients to assess safety. As with all trials conducted at NYU, the trial will be overseen by a Data Safety Monitoring Board that meets every other week.

We were involved in the design of the trial, have a representative on the study’s executive steering committee, and are providing drug supply, as requested by NYU. Any further enrollment in a potential Phase 3 trial will be gated based on an assessment of Phase 2 safety and activity, as well as feasibility of conducting a Phase 3 trial.

The following chart outlines each of our ~~current registrational programs:~~programs by indication and phase:

~~We are developing bardoxolone for the treatment of patients with the following rare forms of CKD:~~

In addition, KKC, our strategic collaborator in CKD, is currently conducting its registrational trial of bardoxolone in diabetic (type 1 and 2) CKD in Japan. KKC completed patient enrollment in this trial in June 2019 and expects to have topline data in the first half of 2022.

NYU has initiated an IST (Phase 2/3 trial) of bardoxolone in COVID-19 patients called BARCONA.

*The CARDINAL study reported one-year data in November 2019 and is an ongoing two-year study.

**See discussion above under “Regulatory Update-Omaveloxolone for Friedreich's Ataxia”.

We are developing bardoxolone for the treatment of patients with certain rare forms of 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). When GFR gets too low, patients develop end-stage kidney disease (ESKD) and require dialysis or a kidney transplant to survive. Dialysis leads to a reduced quality of life and increases the likelihood of serious and life-threatening complications. The five-year survival rate for hemodialysis patients is only approximately 42%.

~~eGFR~~Estimated glomerular filtration rate (eGFR) is an estimate of GFR that nephrologists use to track the decline in kidney function and progression of CKD. In 11 separate CKD clinical trials, bardoxolone has been shown to improve eGFR in patients with diverse etiologies of CKD. We believe that bardoxolone treatment has the potential

to delay or prevent GFR declines that cause the need for dialysis or a transplant in patients with Alport syndrome, ADPKD, and other rare forms of CKD.

We are developing bardoxolone for the treatment of patients with CKD caused by Alport syndrome, ADPKD, and other rare forms of CKD that, in the aggregate, affect more than 700,000 patients in the United States.

Alport syndrome is a rare, ~~and serious hereditary disease that can manifest as early as the first decade~~genetic form of ~~life, causes average annual declines in eGFR of approximately 3 to 4 mL/min/1.73 m~~²~~, and affects approximately 30,000 to 60,000 patients~~CKD caused by mutations in the ~~United States.~~ 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. In patients with the most severe forms of the disease, approximately 50% ~~of patients~~ progress to dialysis by age 25, 90% by age 40, and nearly 100% by age 60. According to the Alport Syndrome Foundation, Alport syndrome affects approximately 30,000 to 60,000 people in the United States. There are currently no approved therapies ~~for~~to treat CKD caused by Alport ~~syndrome anywhere in the world.~~ syndrome.

OnIn November ~~11,~~ 2019, we announced ~~the topline, Year 1 results from~~that the Phase 3 portion of the CARDINAL ~~studying~~study of bardoxolone in Alport syndrome patients. The Phase 3 portion of CARDINAL is an international, multi-center, double-blind, placebo-controlled, randomized registrational trial that enrolled 157 patients with Alport syndrome at approximately 50 study sites in the United States, Europe, Japan, and Australia. Pediatric patients represented approximately 15% of enrolled patients. Patients were randomized one-to-one to bardoxolone or placebo. The primary endpoint for the study was the change in eGFR, an important measure of the ability of the kidney to filter waste products out of the blood, after 48 weeks of treatment. The key secondary endpoint for the study was the change in retained eGFR after 48 weeks of treatment and withdrawal of drug for four weeks. After 52 weeks, patients who completed the first 48 weeks of treatment are restarted on study drug with their original treatment assignments and continue on study drug for a second year. The second-year on-treatment eGFR will be measured after 100 weeks of treatment and the retained eGFR will be measured at Week 104 after withdrawal of drug for four weeks. Additionally, patients who complete the study and meet eligibility requirements can participate in the open-label extension. The FDA has provided us with written guidance that, in patients with CKD caused by

Alport syndrome ~~an analysis of retained eGFR demonstrating an improvement versus placebo after one year of bardoxolone treatment may support a NDA submission for accelerated approval~~met its primary and ~~an improvement versus placebo after two years of treatment may support full approval.~~

key secondary Year 1 endpoints. After 48 weeks of treatment, patients treated with bardoxolone had a statistically significant improvement compared to placebo in mean eGFR of 9.50 mL/min/1.73 m² (p<0.0001). ~~Patients treated with bardoxolone experienced a statistically significant increase from baseline in mean eGFR of 4.72 mL/min/1.73 m~~²~~(p<0.0004), while patients treated with placebo experienced a statistically significant decline from baseline in mean eGFR of -4.78 mL/min/1.73 m~~² ~~(p<0.0002). Patients’ retained eGFR was also assessed at~~At Week 52, after 48 weeks of treatment and four weeks of ~~drug withdrawal. At Week 52,~~off-treatment period, patients treated with bardoxolone had a statistically significant improvement compared to placebo in mean ~~retained~~ eGFR of 5.14 mL/min/1.73 m² (p=0.0012)~~. Patients treated with bardoxolone experienced a nonsignificant decline from baseline~~, while patients in ~~mean retained eGFR~~the placebo arm of ~~-0.96~~CARDINAL lost an average of 6.1 mL/min/1.73 m² ~~(p=0.45), while patients treated with placebo experienced~~. The retained benefit of kidney function during the off-treatment period is a ~~statistically significant decline from baseline in mean retained eGFR of -6.11 mL/min/1.73 m~~² ~~(p<0.0001). Similar efficacy at Week 48 and Week 52 was observed across multiple subgroups, including among pediatric patients.~~

~~Bardoxolone was generally reported to be well tolerated in this study and showed a similar safety profile to the Phase 2 portion of~~key regulatory endpoint for the CARDINAL ~~study. Seventy-five patients (97%) receiving bardoxolone~~ and ~~73 patients (91%) receiving placebo experienced an adverse event (AE). Nine patients (12%) receiving bardoxolone~~FALCON studies. Based on these positive results, and ~~four patients (5%) receiving placebo discontinued study drug due~~subject to ~~an AE, and no individual AE contributed~~discussions with regulatory authorities, we plan to ~~more than two discontinuations in either group.~~

Four patients (5%) receiving bardoxolone and 10 patients (13%) receiving placebo experienced a treatment-emergent serious adverse event (SAE). No fluid overload or major adverse cardiac events were reported in patients treatedproceed with ~~bardoxolone. Blood pressure was reduced relative to baseline~~the submission of regulatory filings this year for marketing approval in the bardoxolone group but was not significantly different between the two groups. The reported AEs were generally mild to moderate in intensity, and the most common AEs observed more frequently in patients treated with bardoxolone compared to patients treated with placebo were increases in aminotransferases and muscle spasms. Increases in aminotransferases are a pharmacological effect of bardoxolone, which increases production of aminotransferases ~~in vitro~~. The aminotransferase increases observed in CARDINAL were associated with improvements (reductions) in total bilirubin and were not associated with liver injury, and we believe they are related to restoration of mitochondrial function. Laboratory markers associated with pharmacodynamic activity, including urinary albumin to creatinine ratio and aminotransferases, were unchanged relative to placebo at Week 52 after a four week withdrawal.United States.

ADPKD is ~~an inherited,~~a rare and serious hereditary form of CKD caused by a genetic defect in PKD1 or PKD2 ~~and is characterized by~~ genes leading to the formation of fluid-filled cysts in the ~~kidneys. Inflammation appears~~kidneys and other organs. Cyst growth can cause the kidneys to ~~play a role in cyst growth~~expand up to five to seven times their normal volume, leading to pain and progressive loss of kidney function. ADPKD affects both men and women of all racial and ethnic groups and is ~~associated~~the leading inheritable cause of kidney failure with disease progression in ADPKD. PKD1 is the most common mutation, causing about 85% of ADPKD cases, and patients generally progress to ESKD, on average, by age 54. ADPKD is the most common single-gene disorder of the kidneys, and there are an estimated ~~400,000~~diagnosed population of 140,000 patients in the United ~~States,~~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.

In a Phase 2 study called PHOENIX, bardoxolone demonstrated a statistically significant increase from baseline in mean eGFR of 9.3 mL/min/1.73 m² (p<0.0001) after 12 weeks of treatment in 31 patients with ~~approximately 140,000 diagnosed. The only therapy approved~~ADPKD. Available historical data for ~~ADPKD is tolvaptan, which was approved~~29 of these patients showed an average annual decline in eGFR of 4.8 mL/min/1.73 m² in the three-year period prior to study entry. The United States ~~in 2018.~~

~~We have initiated a registrational Phase 3 trial called FALCON~~Food and Drug Administration (FDA) has provided us with written guidance that, in patients with ~~ADPKD.~~ADPKD, an analysis of eGFR during the off-treatment period demonstrating an improvement versus placebo after one year of bardoxolone treatment may support accelerated approval, and an improvement versus placebo after two years of treatment may support full approval. In May 2019, we began enrollment in FALCON, is an international, multi-center, randomized, double-blind, placebo-controlled Phase 3 trial studying the safety and efficacy of bardoxolone in approximately 300 patients with ~~ADPKD randomized one-to-one~~ADPKD. The enrollment of new patients was temporarily paused in March of 2020 due to ~~active drug or placebo. We began enrollment~~safety concerns related to the COVID-19 global pandemic, and the screening hold in FALCON was lifted in ~~May 2019.~~June 2020 at some sites. The ~~FDA has provided us~~trial will enroll a broad range of patients from 18 to 70 years old with ~~guidance that, in patients with ADPKD,~~ an ~~analysis of retained~~ eGFR demonstrating an improvement versus placebo after one year of bardoxolone treatment, may support an NDA submission for accelerated approval of bardoxolone for the treatment of ADPKD, and data demonstrating an improvement versus placebo in retained eGFR after two years of treatment may support full approval. We will measure the retained eGFR benefit versus placebo at 52 weeks after treatment on study drug for 48 weeks and a four-week withdrawal of drug. After 52 weeks, patients will resume study drug and will continue on study drug for a second year. The second-year retained eGFR benefit will be measured at Week 104.between 30 to 90 mL/min/1.73 m².

Three additional rare forms of CKD were studied in PHOENIX, ~~was an open-label, multi-center Phase 2 trial evaluating the safety and efficacy of bardoxolone in patients with ADPKD,~~ including IgA nephropathy (IgAN), type 1 diabetic CKD (T1D CKD), and focal segmental glomerulosclerosis (~~FSGS)~~(FSGS). In ~~aggregate, the prevalence~~each of these ~~diseases exceeds 700,000 patients in the United States, representing~~Phase 2 cohorts, bardoxolone demonstrated a meaningful market for bardoxolone in rare forms of CKD. A total of 103 patients were enrolled in the trial in four separate cohorts, including 31 patients with ADPKD, 26 with IgAN, 28 with T1D CKD, and 18 with FSGS. Patients were treated with bardoxolone for 12 weeks in all four cohorts, and each cohort showed statistically significant ~~increases~~increase from baseline in mean eGFR ~~with the change in mean eGFR from baseline across all four cohorts~~after 12 weeks of ~~7.8 mL/min/1.73 m~~² ~~(n=103; p<0.0001). Of the patients that reached Week 12, 88% experienced increases in eGFR at Week 12.~~treatment. We observed that bardoxolone significantly reduced mean systolic blood pressure by 3.8 mmHg (n=103; p=0.002) and mean diastolic blood pressure by 2.8 mmHg (n=103; p=0.0009). Urinary albumin excretion was low upon study entry and remained unchanged by bardoxolone treatment (n=103; p=0.6). The most commonly reported AE across all cohorts was muscle spasms, which were not associated with clinical signs or symptoms of muscle injury. The overall rate of SAEs was low, with three patients reporting SAEs while they received trial drug, none of which were reported as related to bardoxolone.

~~Based on the eGFR improvements observed in PHOENIX patients, we~~ plan to pursue ~~IgAN, T1D~~each of these rare and serious forms of CKD ~~and FSGS~~ as commercial indications. ~~We believe that registrational clinical trials similar~~

The FDA has granted orphan drug designation to the design of the Phase 3 CARDINAL and FALCON trials, with a two-year duration and a retained eGFR benefit endpoint after one and two years of treatment, would be sufficient to form the basis of an NDA submission to the FDA seeking approval of bardoxolone for the treatment of ~~these forms~~Alport syndrome and ADPKD, and the European Commission has granted orphan drug designation to bardoxolone for the treatment of ~~CKD.~~Alport syndrome.

Prior to our CARDINAL Phase 3 trial, ~~bardoxolone has been evaluated in multiple~~ clinical trials enrolling over 2,000 patients exposed to ~~active drug and has~~bardoxolone have demonstrated consistent, clinically meaningful improvement in kidney function across several disease states as measured by eGFR and other markers of kidney function. Specifically, we have observed statistically significant increases in eGFR in all Phase 2 and Phase 3 clinical trials in ~~seven distinct~~numerous patient populations treated with bardoxolone, including patients with ~~PAH and~~ CKD caused by type 2 diabetes (T2D CKD), Alport syndrome, ADPKD, IgAN, T1D CKD, and ~~FSGS~~.FSGS.

We believe these data, in addition to the CARDINAL Phase 3 one-year data, support the potential for bardoxolone to delay or prevent dialysis, kidney transplant, and death in patients with Alport syndrome and other ~~rare~~ forms of CKD.

Additional observations from the prior clinical trials of bardoxolone include the following:

We are developing omaveloxolone for the treatment of patients with FA and recently announced the results of our registrational Phase 2 MOXIe trial in patients with FA. In addition, we have studied omaveloxolone and other Nrf2 activators in preclinical models of Huntington’s disease, ALS, Parkinson’s disease, Alzheimer’s disease and epilepsy, and we plan to pursue the development of omaveloxolone and our other Nrf2 activators for one or more of these diseases. We are also developing RTA 901 in neurodegeneration and neuroprotection indications.

We are developing omaveloxolone for the treatment of patients with FA, an inherited, debilitating, and degenerative neuromuscular disorder that is ~~usually~~typically diagnosed during adolescence and ~~can ultimately lead~~typically leads to premature death. Patients with FA experience progressive loss of coordination, muscle weakness, and fatigue, which commonly ~~progress~~progresses to motor incapacitation and wheelchair reliance. Symptoms generally occur in children, with patients requiring a wheelchair by their teens or early 20s. ~~Based on literature and proprietary research, we believe~~ FA affects approximately 5,000 children and adults in the United States and 22,000 individuals globally. There are currently no approved therapies ~~for the treatment of FA anywhere in the world.~~ to treat FA.

~~Our Phase 2 trial, called MOXIe, was a two-part, international, multi-center, randomized, double-blind, placebo-controlled registrational trial~~In October 2019, we announced that studied the safety and efficacy of omaveloxolone in patients with FA. Additionally, patients who completed the study and meet eligibility requirements can participate in the open-label extension. Part 1 of MOXIe was a dose-ranging study designed to assess safety and identify an optimal dose of omaveloxolone to test in the registrational part 2 portion of the ~~study. A dose of 150 mg per day was selected for part 2, and no safety concerns were noted by the data safety monitoring board (DSMB) that oversaw the trial and reviewed all safety data.~~

~~Based on data from part 1 of~~ MOXIe ~~we designed and powered part 2 of MOXIe, an international, multi-center, double-blind, placebo-controlled, randomized registrational~~ Phase 2 trial ~~that enrolled 103~~of omaveloxolone in patients with FA at 11 trial sites in the United States, Europe, and Australia. Part 2 of MOXIe is the largest global, interventional trial ever conducted in FA. Patients were randomized one-to-one to omaveloxolone or placebo. The primary analysis population included patients without ~~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~~met its primary endpoint of ~~the study. Safety analyses were evaluated in the all randomized population (n=103).~~

~~The primary endpoint for the trial was the~~ change in ~~the~~ mFARS ~~score~~ relative to placebo after 48 weeks of treatment. ~~The mFARS is~~Patients treated with omaveloxolone (150 mg/day) demonstrated a physician-assessed neurological rating scale used to measure FA disease progression. The FDA has indicated that mFARS is an acceptable primary endpoint to evaluate the effect of omaveloxolone for the treatment of patients with FA. Omaveloxolone treatment demonstrated statistically significant, ~~evidence of efficacy for the primary endpoint of the trial, producing a~~ placebo-corrected 2.40 point mean improvement (decrease) in mFARS ~~(n=82; p=~~after 48 weeks of treatment (p=0.014). Patients treated with omaveloxolone ~~experienced a mean~~demonstrated improvement ~~(decrease)~~ in ~~mFARS of 1.55 points from baseline, while patients treated with placebo experienced a mean worsening (increase) 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.~~every subcategory measured under mFARS. Omaveloxolone treatment ~~also demonstrated statistically significant evidence of efficacy in mFARS at Week 48 when the~~ ~~pes cavus~~ patients were included in the analysis (the all randomized population). In the all randomized population, omaveloxolone treatment produced a statistically significant, placebo-corrected 1.93 point mean improvement (decrease) in mFARS (n=103; p=0.034). Omaveloxolone treatment also improved several secondary endpoints included in the trial.

~~Omaveloxolone~~ was generally reported to be ~~generally well-tolerated in this trial. Four (8%)~~well-tolerated. The FDA and the European Commission have granted orphan drug designation to omaveloxolone ~~patients and two (4%)~~for the treatment of FA.

As discussed above under “Regulatory Update-Omaveloxolone for Friedreich’s Ataxia,” the FDA will consider whether a crossover study of omaveloxolone using placebo patients ~~discontinued trial drug due to an AE. The reported AEs~~from MOXIe Part 2 who were generally mild to moderate in intensity, and the most common AEs (i.e., reported in > 20% of patients in either treatment group) observed more frequently in omaveloxolone compared to placebo were headache, nausea, increased aminotransferases, fatigue, and abdominal pain. Increases in aminotransferases are a pharmacological effect of omaveloxolone, which increases production of aminotransferases in vitro, which we believe are related to restoration of mitochondrial function. In MOXIe, the aminotransferase increases were associated with improvements (reductions) in total bilirubin and were not associated with liver injury.

The overall rate of SAEs was low, with three patients on omaveloxolone and three patients on placebo reporting SAEs while on treatment. Two additional omaveloxolone-treated patients reported SAEs approximately two weeks after receiving their final dose. No new safety signals were identified, and the reported SAEs were sporadic and generally expected in FA patients. In the three omaveloxolone patients who reported SAEs while receiving omaveloxolone, none led to discontinuation. Atrial fibrillation was balanced and reported in one omaveloxolone and one placebo patient. One omaveloxolone patient reported anemia that was due to a complication of a procedure and was considered unrelated to omaveloxolone. One omaveloxolone patient reported multiple SAEs, including viral upper respiratory tract infection and laryngitis, along with palpitations, non-cardiac chest pain, and sinus tachycardia. While several of these SAEs were considered possibly relatedcrossed over to omaveloxolone ~~no imbalances in infection or arrhythmia adverse events were observed overall~~treatment in the ~~trial.~~

~~Based~~MOXIe extension study could serve as additional confirmatory evidence. If the FDA accepts the proposal, we could have completed data from the crossover study in the fourth quarter of this year. Assuming that the crossover study data are sufficiently positive to provide confirmatory evidence, our plan would be to submit an NDA during the first quarter of 2021. If the FDA rejects the proposal or if the data are not supportive, we will evaluate whether it is feasible to conduct a second pivotal study on FA patients as suggested by the ~~positive MOXIe results, and subject to discussions~~FDA. Regardless of the interaction with ~~regulatory authorities,~~the FDA, we plan to ~~proceed with the submission of regulatory filings for~~pursue marketing approval inoutside of the United ~~States~~States.

In addition, we have observed compelling activity of omaveloxolone and ~~internationally.~~our other Nrf2 activators in preclinical models of Parkinson’s disease, dementia, epilepsy, Huntington’s disease, and amyotrophic lateral sclerosis (ALS), and we plan to pursue the development of omaveloxolone and our other Nrf2 activators for one or more of these diseases.

We are also developing RTA 901 in neurological indications. RTA 901 is the lead product candidate from our Hsp90 modulator ~~program, which includes highly potent and selective C-terminal modulators of Hsp90.~~program. We have observed favorable activity of RTA 901 in a range of preclinical models of ~~neurodegeneration and neuroprotection,~~neurological disease, including models of diabetic neuropathy, ~~neural inflammation,~~neuroinflammation, and neuropathic pain. RTA 901, administered orally once-daily, has been observed to rescue existing nerve function, restore thermal and mechanical sensitivity, and improve nerve conductance velocity and mitochondrial function in rodent disease models. We have completed a Phase 1 trial to evaluate the safety, tolerability, and pharmacokinetic profile of RTA 901 administered orally, once-daily in healthy adult ~~volunteers. No~~volunteers, and no safety or tolerability concerns were reported. We plan to continue development for RTA 901 in neurological diseases, such as diabetic neuropathy. We are the exclusive licensee of RTA 901 and have worldwide commercial rights.

In addition, ~~to our lead programs in rare forms of CKD and rare forms of neurological diseases,~~ we are exploring additional clinical and preclinical programs. We believe bardoxolone has many potential clinical applications, and we are studying bardoxolone in CTD-PAH in our registrational Phase 3 CATALYST trial.developing RTA 1701, is the lead product candidate from our proprietary series of RORγt inhibitors, for the potential treatment of a broad range of autoimmune, inflammatory, and fibrotic diseases. We have completed a Phase 1 trial to evaluate the safety, tolerability, and pharmacokinetic profile of RTA 1701 in healthy adult volunteers.

We are studying bardoxolone in CTD-PAH, which is a late and often fatal manifestation of many types of autoimmune diseases, including systemic sclerosis (scleroderma), systemic lupus erythematosus, mixed connective tissue disease, and others. CTD-PAH is a subset of PAH, which results in a progressive increase in pulmonary vascular resistance, ultimately leading to right ventricular heart failure and death. Based on literature and proprietary research, we believe there are approximately 12,000 patients with CTD-PAH in the United States and 50,000 worldwide.

In comparison to patients with the idiopathic form of PAH (I-PAH), patients with CTD-PAH generally have a worse prognosis and experience a higher occurrence of small vessel fibrosis and pulmonary veno-obstructive diseases. CTD-PAH represents approximately 30% of the overall PAH population and approximately 10 to 15% of patients with scleroderma or lupus erythematosus. Patients with CTD-PAH are less responsive to existing vasodilator therapies than patients with I-PAH and have a five-year survival rate of approximately 44%, in contrast with a five-year survival rate of approximately 68% for patients with I-PAH. Currently approved therapies, all systemic vasodilators, are used to treat all etiologies of PAH. A meta-analysis of 11 registrational trials comprised of more than 2,700 patients demonstrated that the currently approved therapies are less beneficial for patients with CTD-PAH compared to patients with I-PAH as measured by 6-minute walk distance (6MWD). Patients with CTD-PAH experienced improvement in their 6MWD of only 9.6 meters, or approximately one-third, compared to the improvements observed in patients with I-PAH of 30 meters. Bardoxolone is an Nrf2 activator, not a systemic vasodilator, and directly targets the bioenergetic and inflammatory components of PAH. Additionally, because bardoxolone does not have systemic hemodynamic effects or cause drug-drug interactions in patients with PAH, it may be used in combination with other therapies to a greater incremental effect than an additional vasodilator.

Initial results from our Phase 2 LARIAT trial in patients with PAH showed that bardoxolone provided the greatest improvement in 6MWD to patients with CTD-PAH. Patients with CTD-PAH treated with bardoxolone demonstrated a statistically significant increase in mean 6MWD of 38.2 meters (p<0.001) compared to baseline and a placebo-corrected change in 6MWD of 28.4 meters (p=0.07). Further analysis of data from patients with CTD-PAH who would be eligible for inclusion in our Phase 3 trial, CATALYST, demonstrated a statistically significant increase in mean 6MWD of 42.7 meters (p<0.001) compared to baseline and a placebo-corrected change in 6MWD of 48.5 meters (p=0.005).

We are currently conducting CATALYST, an international, multi-center, randomized, double-blind, placebo-controlled Phase 3 trial that studies the safety and efficacy of bardoxolone in patients with CTD-PAH when added to standard-of-care therapy. The trial has been fully enrolled with 202 patients with CTD-PAH, and we expect to have top-line data from the CATALYST trial in mid-2020. Data from CATALYST demonstrating an improvement in 6MWD versus placebo may support an NDA submission for approval of bardoxolone for the treatment of CTD-PAH. No safety concerns have been reported by the DSMB.

RTA 1701 is the lead product candidate from our proprietary series of RORγt inhibitors for the potential treatment of a broad range of autoimmune, inflammatory, and fibrotic diseases. RTA 1701 is an orally-bioavailable, RORγt-selective allosteric inhibitor that suppresses Th17 differentiation ~~in vitro~~ and demonstrates strong efficacy in rodent disease models of autoimmune disease. RTA 1701 also potently suppresses production of IL-17A, a clinically important cytokine, in human immune cells and when dosed orally to non-human primates. We have conducted a Phase 1 trial to evaluate the safety, tolerability, and pharmacokinetic profile of RTA 1701 in healthy adult volunteers. No safety or tolerability concerns were reported, and we observed an acceptable pharmacokinetic profile. We plan to continue development for RTA 1701 in autoimmune, inflammatory, or fibrotic diseases. We retain all rights to our RORγt inhibitors, which are not subject to any existing commercial collaborations.

To date, we have focused most of our efforts and resources on developing our product candidates and conducting preclinical studies and clinical trials. We have historically financed our operations primarily through revenue generated from our collaborations with AbbVie and KKC, from sales of our securities, with secured loans, and ~~secured loans.~~most recently from 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 KKC, from the Development Agreement with BXLS, and from reimbursements of expenses under the

terms of our agreement with KKC. We have incurred losses in each year since our inception, other than in 2014. As of ~~September~~June 30, ~~2019,~~2020, we had ~~$240.1~~$610.4 million of cash and cash equivalents and an accumulated deficit of ~~$523.6~~$827.0 million.

~~On October 9, 2019, we and AbbVie entered into the~~ ~~Amended AbbVie~~ Agreement pursuant to which we reacquired the development, manufacturing, and commercialization rights concerning its proprietary Nrf2 activator product platform originally licensed to AbbVie in the License Agreement and the Collaboration Agreement. Except as otherwise set forth in the ~~Amended AbbVie~~ ~~Agreement, the other provisions of the License Agreement and the Collaboration Agreement have been terminated. Under the~~ ~~Amended AbbVie~~ Agreement, certain licenses granted to AbbVie will continue, for which AbbVie has granted exclusive sublicenses to us, resulting in our reacquiring worldwide rights to bardoxolone, excluding certain Asian countries that we previously licensed to KKC, and worldwide rights to omaveloxolone and the Second-Generation Activators, in each case that we had licensed to AbbVie under the License Agreement and the Collaboration Agreement. In exchange, we will pay AbbVie $330 million, of which $75 million is payable on December 8, 2019, $150 million is payable on June 30, 2020, and $105 million is payable on November 30, 2021. If we raise cash proceeds of $200 million or more in one or more equity offerings, we are required to prepay AbbVie $25 million, which prepayment will reduce the amount payable to AbbVie on November 30, 2021, from $105 million to $80 million. We also will pay AbbVie an escalating, low single-digit royalty on worldwide net sales, on a product-by-product basis, of omaveloxolone and an identified list of existing Second-Generation Activators. By reacquiring its rights, we were relieved from our obligations under the License Agreement and the Collaboration Agreement.

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 ~~payment~~payments from KKC, we anticipate that we will continue to incur losses for the foreseeable future, and we anticipate that our losses will increase as we continue our development of, ~~and~~ seek regulatory approval for, and potential commercialization of our product candidates. If we do not successfully develop and obtain regulatory approval of our existing product candidates or any future product candidates and effectively manufacture, market, and sell any products that are approved, we may never generate revenue from product sales. Furthermore, even if we do generate revenue from product sales, we may never again achieve or sustain profitability on a quarterly or annual basis. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital. Our failure to become and remain profitable could depress the market price of our Class A common stock and could impair our ability to raise capital, expand our business, diversify our product offerings, or continue our operations.

Our revenue to date has been generated primarily from licensing fees received under our collaborative license agreements and reimbursements for expenses. We currently have no approved products and have not generated any revenue from the sale of products to date. In the future, we may generate revenue from product sales, royalties on product sales, reimbursements for collaboration services under ~~the KKC Agreement,~~our current collaboration agreements, or license fees, milestones, or other 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 KKC Agreement, the AbbVie License Agreement, ~~with AbbVie,~~ and the AbbVie Collaboration Agreement ~~with AbbVie~~ and consists of upfront payments and milestone payments. License revenue recorded with respect to the KKC Agreement, the AbbVie License Agreement, and the AbbVie 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. ~~The~~Under the Reacquisition Agreement, we no longer have performance obligations under the AbbVie License Agreement and the AbbVie Collaboration ~~Agreement with AbbVie were terminated under the~~ ~~Amended AbbVie~~ Agreement. The related remaining balance of deferred revenue for the License Agreement was fully recognized in 2017 and, as discussed below, the remaining deferred balance of $191.7 million related to the Collaboration Agreement will be terminated in the fourth quarter of 2019. Based on existing collaboration agreements, weWe only expect to recognize revenue under the KKC Agreement, which extends through 2021.

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~~June 30, ~~2019,~~2020, we have incurred a total of ~~$734.7~~$859.4 million in research and development expense, ~~the~~a majority of which relates to the development of bardoxolone and omaveloxolone. We expect our research and development expense to continue to increase in the future as we advance our product candidates through clinical trials and expand our product candidate portfolio. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and we consider the active management and development of our clinical pipeline to be crucial to our long-term success. The actual probability of success for each product candidate and preclinical

program may be affected by a variety of factors, including the safety and efficacy data for product candidates, investment in the program, competition, manufacturing capability, and commercial viability.

Research and development 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 contract research organizations (CROs) that conduct and manage clinical trials 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. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates.

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

Currently, KKC ~~is not participating in the development~~has allowed us to conduct clinical studies of bardoxolone in ~~CTD-PAH, ADPKD, or other~~certain rare forms of kidney diseases ~~but is reimbursing~~in Japan and has reimbursed us the majority of the costs for our ~~registrational trial in CKD caused by Alport syndrome~~CARDINAL study in Japan and is ~~responsible~~paying for the costs ~~for~~of a certain number of patients as the in-country caretaker in our ~~registrational trial in ADPKD~~FALCON study in Japan. ~~Our~~We reduced our expenses ~~were reduced~~ by ~~$0.5~~$0.0 million and $0.3 million for KKC’s share of ~~the study~~CARDINAL costs for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~ 2020 and 2019, respectively.

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30				Six Months Ended June 30
	2019		2018		2019		2018		2020		2019		2020		2019
	(unaudited; in thousands)								(unaudited; in thousands)
Bardoxolone methyl	$	12,511	$	11,281	$	31,904	$	32,337	$	9,736	$	10,713	$	23,653	$	19,393
Omaveloxolone	$	5,999		6,817		17,478		14,105		8,313		5,676		14,942		11,479
RTA 901	$	560		62		1,616		328		750		719		1,961		1,055
RTA 1701	$	452		621		1,433		2,125		479		653		1,874		982
Other research and development expenses	$	12,757		8,363		35,517		23,084		17,505		11,793		42,006		22,759
Total research and development expenses	$	32,279	$	27,144	$	87,948	$	71,979	$	36,783	$	29,554	$	84,436	$	55,668

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 ~~employee-related expenses for~~ research and development ~~functions~~salaries, benefits, stock-based compensation and preclinical, research, and discovery costs, which we do not allocate on a program-specific basis.

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

We anticipate that our general and administrative expenses will increase in the future as we ~~increase~~prepare for our ~~headcount to support our continued research and development and~~ potential commercialization of our product candidates. We have also incurred, and anticipate incurring in the future, increased expenses associated with being a public company, including exchange listing and SEC requirements, director and officer insurance premium, legal, audit and tax fees, compliance with the Sarbanes-Oxley Act, regulatory compliance programs, and investor relations costs. ~~Based on positive results from CARDINAL~~Additionally, if and ~~MOXIe, and subject to discussions with~~when we believe the first regulatory ~~authorities,~~approval of one of our product candidates appears likely, we ~~plan to proceed with the submission of regulatory filings for marketing approval in the United States and internationally. Accordingly, we have increased and~~ anticipate ~~continued increases~~an increase in payroll and related expenses as a result of our preparation for commercial operations, especially for the sales and marketing of our product candidates.

Other income ~~represents~~(expense) includes interest and gains earned on our cash and cash equivalents, ~~which include money market funds.~~interest expense on term loans, amortization of debt issuance costs, imputed interest on long term payables, loss on extinguishment of debt, foreign currency exchange gains and losses, gains and losses on sales of assets, and non-cash interest expense on liability related to the sale of future royalties.

Provision for taxes on income consists of net loss, taxed at federal tax rates and adjusted for certain permanent differences. We maintain a full valuation allowance against our net deferred tax assets. Changes in this valuation allowance also affect the tax provision.

Comparison of the Three Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 (unaudited)

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

	2019			2018			Change $			Change %			2020			2019			Change $			Change %
	(in thousands)												(in thousands)
Collaboration revenue
License and milestone	$	7,898		$	4,766		$	3,132			66		$	1,169		$	7,813		$	(6,644	)		(85	)
Other revenue		344			409			(65	)		(16	)		1,904			20			1,884		**
Total collaboration revenue		8,242			5,175			3,067			59			3,073			7,833			(4,760	)		(61	)
Expenses
Research and development		32,279			27,144			5,135			19			36,783			29,554			7,229			24
General and administrative		14,283			7,486			6,797			91			16,600			11,706			4,894			42
Depreciation		258			105			153			146			284			232			52			22
Total expenses		46,820			34,735			12,085			35			53,667			41,492			12,175			29
Other income (expense)
Investment income		1,311			1,094			217			20
Interest expense		(2,389	)		(2,360	)		(29	)		(1	)
Total other income (expense)		(1,078	)		(1,266	)		188			15
Other income (expense), net														(16,990	)		(701	)		(16,289	)	**
Loss before taxes on income		(39,656	)		(30,826	)		(8,830	)		(29	)		(67,584	)		(34,360	)		(33,224	)		(97	)
Provision for taxes on income		38			9			29			322
(Benefit from) provision for taxes on income														(3	)		20			(23	)		(115	)
Net loss	$	(39,694	)	$	(30,835	)	$	(8,859	)		(29	)	$	(67,581	)	$	(34,380	)	$	(33,201	)		(97	)
** Percentage not meaningful

License and milestone revenue represented approximately ~~96%~~38% and ~~92%~~100% of total revenue for the three months ended ~~September~~June 30, 2020 and 2019, respectively, and ~~2018, respectively.~~consisted primarily of the recognition of deferred revenue. License and milestone revenue ~~increased~~decreased by ~~$3.1~~$6.6 million or ~~66%~~85% during the three months ended ~~September~~June 30, ~~2019~~2020, compared to the three months ended ~~September~~June 30, ~~2018. A reduction~~2019, primarily due to the Reacquisition Agreement in October 2019, which ended our performance obligations under the AbbVie Collaboration Agreement and resulted in the writing off of the related remaining deferred revenue balance, after which no further revenue was recognized. Total revenue of $1.2 million was recognized during the three months ended June 30, 2020 from deferred revenue related to ~~an adjustment in the calculation of a regulatory milestone revenue included as variable consideration in the transaction price under~~ the KKC Agreement ~~was recognized in the prior year period~~. ~~Since we did not have a similar event in the current period, the~~

~~Other revenue was immaterial~~$1.9 million for the three months ended ~~September~~June 30, ~~2019 and 2018.~~2020, compared to the three months ended June 30, 2019. The increase was primarily due to $1.6 million in revenue recognized for reimbursements of expenses from KKC.

The following table summarizes the sources of our revenue for the three months ended ~~September~~June 30:

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

2019

2018

(in thousands)

License and milestone

Collaboration Agreement

$
6,717

$
6,717

KKC Agreement

1,181

(2,951
)
Other

—

1,000

Total license and milestone

7,898

4,766

Other revenue

344

409

Total collaboration revenue

$
8,242

$
5,175

	2020		% of Total Expenses			2019		% of Total Expenses
	(in thousands)
Research and development	$	36,783		68	%	$	29,554		71	%
General and administrative		16,600		31	%		11,706		28	%
Depreciation		284		1	%		232		1	%
Total expenses	$	53,667				$	41,492

Research and development expenses increased by ~~$5.1~~$7.2 million, or ~~19%~~24%, for the three months ended ~~September~~June 30, ~~2019,~~2020, compared to the three months ended ~~September~~June 30, ~~2018.~~2019. The increase was primarily due to ~~$3.3~~$8.5 million in increased ~~personnel and equity compensation~~personnel-related expenses related to ~~support~~the growth of our development activities ~~$0.9~~and accelerated recognition of stock-based compensation expense from employees who entered into consulting agreements at the termination of employment; $1.6 million in increased ~~medical affairs and other research activities, and $0.7 million caused by two components: increased~~ manufacturing costs to support product registration ~~and startup activities for FALCON and the extension trials for our registrational programs, which were~~ offset by a decrease in clinical study expenses related to stopping the CATALYST study and its extension study; and $2.3 million in decreased ~~clinical expenses due to fully enrolled and completed studies.~~medical affairs expenses.

Research and development expenses, as a percentage of total expenses, was ~~69%~~68% and ~~78%~~71% for the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The decrease of 9%3% was primarily due to a proportionately larger increase in general and administrative expenses, ~~such as~~which includes personnel and ~~equity~~stock-based compensation expenses and rent and office expenses to support growth in our development and commercial readiness activities.

General and administrative expenses increased by ~~$6.8~~$4.9 million, or ~~91%~~42%, for the three months ended ~~September~~June 30, ~~2019,~~2020, compared to the three months ended ~~September~~June 30, ~~2018.~~ 2019. The increase was primarily due to ~~$3.3~~$6.1 million in increased personnel and ~~equity~~stock-based compensation expenses, ~~$1.7~~offset by a decrease of $0.6 million in ~~increased rent~~marketing and office expenses to support growth in our development activities, $0.3 million in increased professional fees related to audit, legal, and tax-related services, and $0.9 million in increase patent fees.commercialization expenses.

General and administrative expenses, as a percentage of total expenses, was 31% and ~~22%~~28%, for the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The increase of 9%3% was primarily due to a proportionately larger increase in general and administrative expenses, compared to research and development expenses.

~~Depreciation was~~Other income (expense), net increased by ~~$0.2~~$16.3 million ~~or 146%,~~ for the three months ended ~~September~~June 30, ~~2019,~~2020, compared to the three months ended ~~September~~June 30, ~~2018,~~2019. The increase was primarily due to ~~increases~~$11.2 million from loss on debt extinguishment, $3.2 million of additional interest expense attributable to additional borrowings under the Term B Loan drawn in ~~property~~December 2019 and ~~equipment~~the payable due to collaborator related to ~~growth~~the Reacquisition Agreement in ~~personnel~~October 2019, and ~~office space.~~

~~Investment~~$1.2 million in decreased investment income ~~increased by $0.2 million, or 20%, for the three months ended September 30, 2019, compared to the three months ended September 30, 2018,~~ due to ~~investment and~~declining interest ~~income earned on higher average balances of cash and cash equivalents.~~rates.

~~Interest expense during the three months ended September 30, 2019 was consistent with the three months ended September 30, 2018.~~

~~Provision for~~Benefit from taxes on income was immaterial for the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019.

Comparison of the ~~Nine~~Six Months Ended ~~September~~June 30, 2020 and 2019 ~~and 2018~~ (unaudited)

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

	2019			2018			Change $			Change %			2020			2019			Change $			Change %
	(in thousands)												(in thousands)
Collaboration revenue
License and milestone	$	23,437		$	44,452		$	(21,015	)		(47	)	$	2,338		$	15,539		$	(13,201	)		(85	)
Other revenue		409			685			(276	)		(40	)		2,088			64			2,024		**
Total collaboration revenue		23,846			45,137			(21,291	)		(47	)		4,426			15,603			(11,177	)		(72	)
Expenses
Research and development		87,948			71,979			15,969			22			84,436			55,668			28,768			52
General and administrative		36,027			24,802			11,225			45			37,387			21,744			15,643			72
Depreciation		659			311			348			112			562			401			161			40
Total expenses		124,634			97,092			27,542			28			122,385			77,813			44,572			57
Other income (expense)
Investment income		4,812			1,787			3,025			169
Interest expense		(7,199	)		(3,773	)		(3,426	)		(91	)
Loss on extinguishment of debt		—			(1,007	)		1,007			100
Other income (expense)		7			—			7			100
Total other income (expense)		(2,380	)		(2,993	)		613			20
Other income (expense), net														(20,804	)		(1,301	)		(19,503	)	**
Loss before taxes on income		(103,168	)		(54,948	)		(48,220	)		(88	)		(138,763	)		(63,511	)		(75,252	)		(118	)
Provision for taxes on income		60			15			45			300
(Benefit from) provision for taxes on income														(22,243	)		23			(22,266	)	**
Net loss	$	(103,228	)	$	(54,963	)	$	(48,265	)		(88	)	$	(116,520	)	$	(63,534	)	$	(52,986	)		(83	)
** Percentage not meaningful

License and milestone revenue represented approximately ~~98%~~53% and 100% of total revenue for ~~each~~the six months ended June 30, 2020, and 2019, respectively, and consisted primarily of the ~~nine months ended September 30, 2019 and 2018.~~recognition of deferred revenue. License and milestone revenue decreased by ~~$21.0~~$13.2 million or ~~47%, for~~85% during the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2018. Additional~~2019, primarily due to the Reacquisition Agreement in October 2019, which ended our performance obligations under the AbbVie Collaboration Agreement and resulted in the writing off of the related remaining deferred revenue balance, after which no further revenue was recognized. Total revenue of $2.3 million was recognized during the six months ended June 30, 2020 from deferred revenue related to ~~variable consideration that was included in the transaction price under~~ the KKC Agreement ~~was recognized~~ ~~in the prior year period~~. ~~Since we did not have a similar event in the current period, the revenue decreased by comparison.~~

Other revenue ~~decreased~~increased by ~~$0.3~~$2.0 million ~~or 40%, during~~for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019. The increase was primarily due to ~~a decrease~~$1.6 million in revenue recognized for reimbursements of expenses from ~~KKC for expenses incurred.~~KKC.

The following table summarizes the sources of our revenue for the ~~nine~~six months ended ~~September~~June 30:

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

2019

2018

(in thousands)

License and milestone

Collaboration Agreement

$
19,931

$
19,931

KKC Agreement

3,506

23,521

Other

—

1,000

Total license and milestone

23,437

44,452

Other revenue

409

685

Total collaboration revenue

$
23,846

$
45,137

	2020		% of Total Expenses			2019		% of Total Expenses
	(in thousands)
Research and development	$	84,436		69	%	$	55,668		71	%
General and administrative		37,387		30	%		21,744		28	%
Depreciation		562		1	%		401		1	%
Total expenses	$	122,385				$	77,813

Research and development expenses increased by ~~$16.0~~$28.8 million, or ~~22%~~52%, for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~ 2019. The increase was primarily due to ~~$8.6~~$21.7 million in increased ~~personnel and equity compensation~~personnel-related expenses related to ~~support~~the growth of our development

activities ~~$3.3~~and accelerated recognition of stock-based compensation expense as a result of the death of an executive and employees who entered into consulting agreements at the termination of employment; $9.9 million in increased ~~medical affairs and other research activitiesto support our registrational trials, and~~ ~~$3.6 million caused by two components: increased~~ manufacturing costs to support product registration and ~~startup activities for FALCON~~increased clinical, clinical pharmacology, and ~~the extension trials for~~toxicity study expenses to support our registrational programs, as well as our RTA 901 and RTA 1701 programs, which were offset by a decrease in clinical study expenses related to stopping the CATALYST study and its extension study; and $2.7 million in decreased ~~clinical expenses due to fully enrolled~~medical affairs and ~~completed studies.~~research expenses.

Research and development expenses, as a percentage of total expenses, was ~~71%~~69% and ~~74%~~71% for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The decrease of ~~3% is~~2% was primarily due to a proportionately larger increase in general and administrative expenses, ~~such as~~which includes personnel and ~~equity~~stock-based compensation expenses and rent and office expenses to support growth in our development and commercial readiness activities.

General and administrative expenses increased by ~~$11.2~~$15.6 million, or ~~45%~~72%, for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~ 2019. The increase was primarily due to ~~$8.4~~$14.2 million in increased personnel and ~~equity~~stock-based compensation expenses, ~~$3.8~~$0.6 million in increased ~~rent~~insurance expenses, and ~~office expenses to support growth in our development activities, and $0.9~~$0.5 million in increased ~~professional fees related to audit, legal,~~marketing and ~~tax-related services, which were offset by a decrease in sublicense fees of $2.5 million and other expenses related to the achievement of a KKC milestone in 2018.~~commercialization expenses.

General and administrative expenses, as a percentage of total expenses, was ~~29%~~30% and ~~26%~~28%, for the ~~nine~~six months ended ~~September~~June 30, 2020 and 2019, ~~and 2018,~~ respectively. The 3% increase of 2% was primarily due to a proportionately larger increase in general and administrative expenses, compared to research and development expenses.

~~Depreciation was~~Other income (expense), net increased by ~~$0.3~~$19.5 million ~~or 112%,~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019. The increase was primarily due to ~~increases in property and equipment related to growth in personnel and office space.~~

~~Investment income increased by $3.0~~$11.2 million ~~or 169%, for the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018, due to investment and~~from loss on debt extinguishment, $6.7 million of additional interest ~~income earned on higher average balances of cash and cash equivalents.~~

~~Interest~~ expense ~~increased by $3.4 million, or 91%, for the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018, due~~attributable to additional borrowings under ~~our Restated~~the Term B Loan drawn in December 2019 and the payable due to collaborator related to the Reacquisition Agreement ~~entered~~ in ~~June 2018.~~October 2019,and $1.0 million in decreased investment income due to declining interest rates.

~~Provision for~~Benefit from taxes on income ~~was immaterial for the nine months ended September 30, 2019 and 2018.~~

~~Cash-based Operating Expenses (non-GAAP) for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)~~

~~Total expenses (GAAP) were $46.8 million and $124.6~~increased by $22.2 million for the ~~three and nine~~six months ended ~~September~~June 30, ~~2019, respectively,~~2020, compared to ~~$34.7 million and $97.1 million for~~ the ~~three and nine~~six months ended ~~September~~June 30, 2018, respectively. Our cash-based operating expenses (a non-GAAP measure calculated as total expenses, less stock-based compensation expense and depreciation expense) were $41.2 million and $109.9 million2019. The increase was primarily due to a tax refund we have filed for under the ~~three and nine months ended September 30, 2019, respectively, compared to $31.9 million and $89.0 million for~~provisions of the ~~three and nine months ended September 30, 2018, respectively.~~

We expect our cash-based operating expenses to continue to increase in the future as we advance bardoxolone and omaveloxolone through ongoing and future clinical trials, scale manufacturing for registrational and validation purposes, advance other product candidates into mid and later stage clinical trials, expand our product candidate portfolio, increase both our research and development and administrative personnel, and plan for commercialization of our product candidates.

We believe cash-based operating expenses, in addition to GAAP financial measures, provides a meaningful measure of our ongoing business and operating performance, by allowing investors to analyze our financial results similarly to how management analyzes our financial results by viewing period expense totals more indicative of effort directly expended to advance the business and our product candidates. The table below reconciles cash-based operating expenses to total expenses as reported on the Unaudited Consolidated Statements of Operations:

~~For additional information about our non-GAAP financial measure, see “—Non-GAAP Financial Measure”.~~CARES Act.

Since our inception, we have funded our operations primarily through collaboration and license agreements, the sale of preferred and common stock, secured loans, and ~~secured loans.~~the sale of future royalties. Through ~~September~~June 30, ~~2019,~~2020, we have raised gross cash proceeds of $476.6 million through the sale of convertible preferred stock and $780.0 million from payments under license and collaboration agreements. We also obtained ~~$402.3~~$944.7 million in net proceeds from our ~~IPO~~initial public offering, follow-on offerings, and ~~follow-on offerings~~the sale of our Class A common stock under the Purchase Agreement, and ~~$77.2~~$299.0 million in net proceeds from the sale of future royalties under the Development Agreement. We also obtained $151.6 million in net proceeds from our Amended Restated Loan ~~Agreement.~~Agreement, which we paid off in June 2020. We have not generated any revenue from the sale of any products. As of ~~September~~June 30, ~~2019,~~2020, we had available cash and cash equivalents of approximately ~~$240.1~~$610.4 million. Our cash and cash equivalents 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~~six months ended ~~September 30 (unaudited):~~June 30:

	2019			2018			2020			2019
	(in thousands)						(in thousands)
Net cash (used in) provided by:
Operating activities	$	(101,776	)	$	(46,286	)	$	(237,107	)	$	(61,441	)
Investing activities		(2,420	)		(370	)		(384	)		(2,092	)
Financing activities		6,555			292,061			183,586			6,192
Net change in cash and cash equivalents	$	(97,641	)	$	245,405		$	(53,905	)	$	(57,341	)

Net cash used in operating activities was ~~$101.8~~$237.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, consisting primarily of a net loss of ~~$103.2~~$116.5 million adjusted for non-cash items including stock-based compensation expense of ~~$14.1~~$34.1 million, loss on extinguishment of debt of $11.2 million, depreciation and amortization expense of ~~$1.7~~$4.7 million, and a net increase in operating assets and liabilities of $171.3 million. The significant items in the change in operating assets that impacted our use of cash in operations were an increase in income tax receivable of $22.2 million and a decrease in payable to collaborators of $150.0 million for a payment made on June 30, 2020 under the Reacquisition Agreement.

Net cash used in operating activities was $61.4 million for the six months ended June 30, 2019, consisting primarily of a net loss of $63.5 million adjusted for non-cash items including stock-based compensation expense of $8.7 million, depreciation and amortization expense of $1.1 million, and a net decrease in operating assets and liabilities of ~~$14.4~~$7.7 million. The significant items in the change in operating assets that impacted our use of cash in operations include increases in accrued direct research and other current and long-term liabilities of ~~$11.4~~$9.8 million ~~primarily~~ due to activities ~~directly~~ related to ~~our~~ clinical trials and ~~other~~personnel-related activities, ~~to support our registrational trials,~~ an increase in prepaid expenses and other current assets of ~~$1.9~~$3.2 million due to increases in prepaid subscriptions and insurance premiums, and decreases in amounts earned or due from collaboration agreements of $0.9 million and deferred revenue of ~~$23.4~~$15.5 million. The decrease in deferred revenue is due to the ratable recognition of revenue over the expected term of the performance obligations under our collaboration agreements with AbbVie and KKC, which resulted in recognition of ~~$23.4~~$15.5 million of license and milestone ~~revenue.~~revenue.

~~Net cash used in operating activities was $46.3 million for the nine months ended September 30, 2018,~~ consisting primarily of a net loss of $55.0 million adjusted for non-cash items including stock-based compensation expense of $7.8 million, depreciation and amortization expense of $0.9 million, loss on extinguishment of debt of $1.0 million, and a net increase in operating assets and liabilities of $1.0 million. The significant items in the change in operating assets and liabilities include an increase in prepaid expenses, other current assets, and other assets of $1.3 million primarily due to receivables from KKC related to reimbursement for expenses incurred, an increase in accrued direct research and other current and long-term liabilities of $10.8 million due clinical trial activities, and a decrease in deferred revenue of $13.5 million. The decrease in deferred revenue is due to the ratable recognition of revenue over the expected term of the performance obligations under our collaboration agreements with AbbVie and KKC, which resulted in recognition of $43.5 million of license and milestone revenue, offset by the achievement of the regulatory milestone of $30 million related to the KKC Agreement, which was recognized as deferred revenue.Investing Activities

Net cash used in investing activities of ~~$2.4~~$0.4 million and $2.1 million for the ~~nine~~ six months ended ~~September~~June 30, 2020 and 2019, respectively, were primarily due to capital expenditures in connection with an expansion of our office space and ~~purchases~~purchase of property and equipment.

~~Net cash used in investing activities for the nine months ended September 30, 2018 was not significant.~~

Net cash provided by financing activities ~~of $6.6~~was $183.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019 were~~2020, primarily due to ~~stock option exercises.~~$55.4 million and $293.6 million in funding received from the Purchase Agreement and Development Agreement with BXLS, respectively, and $1.8 million from options exercised, offset by $167.2 million to pay off our Term Loans.

Net cash provided by financing activities ~~of $292.1~~was $6.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019, were primarily due to ~~net proceeds of $232.8 million from our follow-on public offering and $57.7 million from our Restated Loan Agreement.~~option exercises.

To date, we have not generated any revenue from product sales. We do not know when or whether we will generate any revenue from product sales. We do not expect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize one or more of our current or future product candidates. We anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products. We are subject to all the risks related to the development and commercialization of novel therapeutics, 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.

On June 24, 2020, we closed on the Development Agreement and Purchase Agreement, each dated June 10, 2020, under which certain Blackstone 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 June 24, 2020, we paid off our Term Loans with Oxford Finance LLC and Silicon Valley Bank, which included payments for principal of $155.0 million, prepayment fees of $5.4 million, exit fees of $6.7 million, and accrued and unpaid interest of $1.0 million.

On March 27, 2020, the United States enacted the CARES Act. Under its provisions, for the six months ended June 30, 2020, we recognized a tax benefit and receivable of $22.1 million associated with the ability to carryback an applicable prior year’s net operating losses to a preceding year to generate a refund.

On November 18, 2019, we closed a follow-on underwritten public offering of 2,760,000 shares of our Class A common stock for gross proceeds of $505.1 million. Net proceeds to us from the offering were approximately $491.9 million, after deducting underwriting discounts and commissions and offering expenses.

On October 15, 2019, we entered into athe Lease Agreement, relating to the lease of approximately 327,400 square feet of office and laboratory space located in Plano, Texas. The term of the Lease is estimated to commence mid-2022, when construction is completed, and continue for 16 years, with up to 10 years of extension at our option. The initial annual base rent will be determined based on the project cost, subject to an initial annual cap of approximately $13.3 million, which may increase in certain circumstances. Beginning in the third lease year, the base rent will increase 1.95% per annum each year. In addition to the annual base rent, we will pay for taxes, insurance, utilities, operating expenses, assessments under private covenants, maintenance and repairs, certain capital repairs and replacements, and building management fees.

On October 9, 2019, we and AbbVie entered into the ~~Amended AbbVie~~Reacquisition Agreement pursuant to which we reacquired the development, manufacturing, and commercialization rights concerning ~~its~~our proprietary Nrf2 activator product platform originally licensed to AbbVie in the AbbVie License Agreement and the AbbVie Collaboration Agreement. In exchange for such rights, we will pay AbbVie ~~$330~~$330.0 million, of which ~~$75~~$100.0 million ~~is payable on~~was paid as of December 8,31, 2019, ~~$150~~$150.0 million ~~is payable~~was paid on June 30, 2020, and ~~$105~~$80.0 million is payable on November 30,

2021. ~~If we raise cash proceeds of $200 million or more in one or more equity offerings, we are required to prepay AbbVie $25 million, which prepayment~~We will ~~reduce the amount payable to AbbVie on November 30, 2021, from $105 million to $80 million. We~~ also ~~will~~ pay AbbVie an escalating, low single-digit royalty on worldwide net sales, on a product-by-product basis, of omaveloxolone and an identified list of existing Second-Generation Activators. As a result of entering into the Amended AbbVie Agreement, while we are finalizing our assessment of the accounting for the transaction, we anticipate that we will recognize a charge in the fourth quarter of 2019, which will reflect the repurchase of the rights and the termination of the future obligations on which the Company has deferred revenue recorded as of September 30, 2019.certain next-generation Nrf2 activators. The termination of our deferred revenue balance will not have an impact on our cash flow.

~~On October 9, 2019, we entered into the~~ ~~Amendment~~ with the Lenders, which amended the Restated Loan Agreement entered into among us and the Lenders on June 14, 2018. Under the Amendment, the Term B Loan availability was increased from $45 million to $75 million and the availability period was increased from within 30 days to 60 days after the achievement of the one of two milestones. As one of the milestones was achieved on October 14, 2019, the availability period will end on December 13, 2019. If we borrow under the Term B Loan, we expect to incur additional related interest expense. As of September 30, 2019, the current portion of the loan is $5.3 million, which is based on the interest-only payment period under the Term A Loan. If we draw the Term B Loan, the interest-only period will extend through June 1, 2021, and the current portion of the loan will be $0 until July 1, 2020.

On July 27, 2018, we closed a follow-on underwritten public offering of 3,450,000 shares of its Class A common stock for gross proceeds of $248.4 million. Net proceeds to us from the offering were approximately $232.8 million, after deducting underwriting discounts and commissions and offering expenses.

On June 14, 2018, we amended and restated our Loan Agreement. Under our Restated Loan Agreement, the Term A Loan was increased from $20.0 million to $80.0 million, of which Reata borrowed an additional $60.0 million on June 14, 2018, which resulted in an outstanding principal balance of $80.0 million under the Term A Loan at June 14, 2018.

In November 2017, we entered into an at-the-market equity offering sales agreement with Stifel, Nicolaus & Company, Incorporated, that established a program pursuant to which ~~they~~it may offer and sell up to $50.0 million of ~~our~~its Class A common stock from time to time in at-the-market ~~transactions as stated~~transactions. In November 2019, we suspended the program in ~~the prospectus supplement filed~~connection with the ~~SEC pursuant to Rule 424(b)(5), dated as of~~ November ~~9, 2017.~~2019 equity offering, which remains suspended until we notify Stifel otherwise. To date, no sales have been made under ~~the~~our at-the-market offering program.

~~Under the~~ ~~Amended AbbVie~~ Agreement, we have significantly increased our current obligations, but we believe that our current cash, along with our access to additional equity or debt funding, will enable us to meet our current obligations through December 31, 2020. Our longer term liquidity requirements will require us to raise additional ~~capital.~~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 ~~the~~our KKC Agreement and the timing of our expenditures related to clinical trials. We believe our existing cash and cash equivalents will be sufficient to enable us to fund our operations through the end of 2023. However, we anticipate opportunistically raising additional capital before that time through equity offerings, collaboration or license agreements, additional debt, 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 ~~debt.~~royalty financing. Additional securities may include common stock, preferred stock, or debt securities. We may explore strategic collaborations or license arrangements for ~~certain~~any of our ~~earlier stage assets, including RTA 901 and RTA 1701.~~product candidates. If we do explore any arrangements, there can be no assurance that any agreement will be reached, and we may determine to cease exploring a potential transaction for any or all of the assets at any time. If an agreement is reached, there can be no assurance that any such transaction would provide us with a material amount of additional capital resources.

Until we can generate a sufficient amount of revenue from our product candidates, if ever, we expect to finance future cash needs through public or private equity or debt offerings, commercial loans, royalty financings, and collaboration or license ~~transactions, and royalty financings.~~transactions. The outbreak of COVID-19 has caused significant disruption of global financial markets, which may reduce our ability to access capital, which could negatively affect our liquidity. Additional capital may not be available on reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back, or discontinue the development or commercialization of one or more of our product candidates. If we raise additional funds through the issuance of additional equity or debt securities, it could result in dilution to our existing stockholders or increased fixed payment obligations, and any such securities may have rights senior to those of our common stock. If we incur indebtedness or obtain royalty financing, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell, or license intellectual property rights, and other operating restrictions that could adversely affect our ability to conduct our business, and any such debt or royalty financing could be secured by some or all of our assets. ~~If we sell royalty interests, we may be required to make significant royalty payments for an extended period of time.~~ 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, ~~2018~~ 2019and in the Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2019.~~March 31, 2020, under “Part II, Item 1A. Risk Factors.”

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.

As of ~~September~~June 30, ~~2019,~~2020, there have been no material changes, outside of the ordinary course of business, in our outstanding contractual obligations from those disclosed within “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, as contained in our Annual Report on Form 10-K for year ended December 31, ~~2018.~~2019, except for those discussed below.

Below are our contractual obligations as of ~~September~~June 30, ~~2019~~2020 (unaudited):

	Payments due by period								Payments due by period
	Less than 1 year		1 to 3 years		4 to 5 years		Total		Less than 1 year		1 to 3 years		4 to 5 years		Total
	(in thousands)								(in thousands)
Operating lease obligations(1)	$	3,336	$	2,424	$	—	$	5,760	$	3,787	$	5,918	$	—	$	9,705
Outstanding secured term loan		6,666		55,556		17,778		80,000
Payable to collaborators										—		80,000		—		80,000
Total contractual obligations	$	10,002	$	57,980	$	17,778	$	85,760	$	3,787	$	85,918	$	—	$	89,705

The terms of the Development Agreement require us to pay potential future royalty payments based on product development success. The above table excludes such obligations as the amount and timing of such obligations are unknown or uncertain, which are further described in Note 5, Liability Related to Sale of Future Royalties, to Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.

As of ~~September~~June 30, ~~2019,~~2020, 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 United States generally accepted accounting principles. 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 for the year ended December 31, ~~2018.~~2019. During the ~~quarter~~three months ended ~~March 31, 2019~~June 30, 2020, we ~~adopted Topic 842.~~entered into the Development Agreement with an affiliate of BXLS. As a result, we recorded a liability related to sale of ~~this adoption, we updated~~future royalties that are based on our ~~Leases policies.~~current estimate of future royalties expected to be paid over the estimated term of the Development Agreement and non-cash interest expense over the estimated term of the Development Agreement. There have been no other changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

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.

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

In addition to the U.S. GAAP financial measures, this Quarterly Report on Form 10-Q includes cash-based operating expenses, a non-GAAP financial measure, which the Company defines as total expenses excluding stock-based compensation expense and depreciation expense. A reconciliation of this non-GAAP financial measure to its most directly comparable U.S. GAAP financial measure is included in “—Results of Operations—Cash-based Operating Expenses (non-GAAP) for the three and nine months ended September 30, 2019 (unaudited)” above.

Non-GAAP financial measures should be considered in addition to, not in isolation or as a substitute for, U.S. GAAP financial measures. In addition, our non-GAAP financial measure may differ from similarly named measures used by other companies. You should carefully evaluate our non-GAAP financial measure, the adjustments included in our non-GAAP financial measure, and the reasons we consider it appropriate for analysis supplemental to our GAAP information. This non-GAAP financial measure has important limitations as an analytical tool due to the exclusion of some but not all items that affect the most directly comparable GAAP financial measure.

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 ~~$240.1~~$610.4 million at ~~September~~June 30, ~~2019,~~2020, consisting primarily of funds in operating cash accounts. 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 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 also have interest rate exposure as a result of our Term A Loan. As of September 30, 2019, the outstanding principal amount of our Term A Loan was $80.0 million. Our Term A Loan bears interest at a floating per annum rate calculated as 7.79% plus the greater of the 30-day U.S. Dollar LIBOR rate reported in The Wall Street Journal or 1.91%, with a minimum rate of 9.7% and a maximum rate of 12.29%. Changes in the U.S. Dollar LIBOR rate may therefore affect our interest expense associated with the Term A Loan. An increase of 100 basis points in interest rates would increase expense by approximately $0.8 million annually based on the amounts currently outstanding and would not materially affect our results of operations.

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.

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~~June 30, ~~2019.~~2020. 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 ~~(15 U.S.C. 78a~~ ~~et seq.~~) 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~~June 30, ~~2019,~~2020, 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 in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and ~~15(d)-15(f)~~15d-15(f) promulgated under the Exchange Act, during the three months ended ~~September~~June 30, ~~2019,~~2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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, ~~2018,~~ 2019, and our Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2019,~~March 31, 2020, 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, ~~2018~~ 2019 and the Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2019.~~March 31, 2020.

~~Unregistered Sales of Equity Securities~~None, except as previously reported on a Current Report on Form 8-K.

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	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3534
Item 4.	Controls and Procedures	35
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	3635
Item 1A.	Risk Factors	3635
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3635
Item 3.	Defaults Upon Senior Securities	3635
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	37
Signatures		38

	As of September 30, 2019		As of December 31, 2018
	(in thousands)
Current portion of long-term debt¹	$	6,667	$	—
Less current portion of unamortized issuance cost		1,354		—
Total current portion of long-term debt, net of debt issuance cost		5,313		—

Principal Amount		80,000		80,000
Exit Fee		5,200		5,200
Less long-term unamortized issuance cost		3,610		5,981
Less current portion of long-term debt		6,667	$	—
Total long-term debt, net of current portion and debt issuance cost	$	74,923	$	79,219
¹ Current portion of principal payments reflects the interest-only payment period under the Term A Loan. If the Company draws the Term B Loan, the interest-only period will extend through June 1, 2021, and the current portion will be $0 until July 1, 2020.

	Liability Related to Sale of Future Royalties
	(in thousands)
Transaction date balance	$	294,454
Non-cash interest expense recognized, net of transaction cost amortization		664
Balance at June 30, 2020		295,118
Less: Unamortized transaction cost		(884	)
Carrying value at June 30, 2020	$	294,234

	Number of Options			Weighted-Average Exercise Price
Outstanding at January 1, 2020		4,038,949		$	41.24
Granted		973,999		$	203.19
Exercised		(47,351	)	$	37.51
Forfeited		(171,917	)	$	94.68
Outstanding at June 30, 2020		4,793,680		$	72.27
Exercisable at June 30, 2020		2,240,699		$	33.31

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

	Nine Months Ended September 30, 2018
	Common Stock A				Common Stock B						Additional Paid-In		Shareholder Notes			Total Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount			Capital		Receivable			Deficit			(Deficit) Equity
Balance at December 31, 2017		19,975,340	$	20		6,166,166		$	7		$	190,145	$	(2	)	$	(337,143	)	$	(146,973	)
Net loss		—		—		—			—			—		—			(54,963	)		(54,963	)
Compensation expense related to stock options		—		—		—			—			7,781		—			(18	)		7,763
Exercise of options		—		—		106,024			—			1,498		—			—			1,498
Proceeds from payments of shareholder promissory notes		—		—		—			—			6		2			—			8
Public offering of common stock, net of offering costs		3,450,000		4		—			—			232,843		—			—			232,847
Conversion of common stock Class B to Class A		458,625		—		(458,625	)		(1	)		—		—			—			(1	)
Adoption of new accounting guidance		—		—		—			—			—		—			(2,634	)		(2,634	)
Balance at September 30, 2018		23,883,965	$	24		5,813,565		$	6		$	432,273	$	—		$	(394,758	)	$	37,545

	Number of Options			Weighted-Average Exercise Price
Outstanding at January 1, 2019		3,320,571			21.20
Granted		1,624,133			64.94
Exercised		(395,641	)		16.30
Forfeited		(276,306	)		34.42
Outstanding at September 30, 2019		4,272,757			37.51
Exercisable at September 30, 2019		1,743,886			22.56

	Number Performance Based RSUs		Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2019		—		—
Granted		50,000		72.70
Vested		—		—
Forfeited		—		—
Outstanding at September 30, 2019		50,000		72.70

~~Program~~	~~Current Registrational Trial~~	~~Next Expected Milestone~~
~~CKD caused by Alport syndrome~~	~~CARDINAL~~	~~Regulatory Filings~~
~~Bardoxolone~~
FA	~~MOXIe~~	~~Regulatory Filings~~
~~Omaveloxolone~~
~~ADPKD~~	~~FALCON~~	~~Completion of Enrollment~~
~~Bardoxolone~~
~~CTD-PAH~~	~~CATALYST~~	~~Phase 3 Data~~
~~Bardoxolone~~

Exhibit Number		Description

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

�� 3.2		Second Amended and Restated Bylaws, dated as of December 7, 2016 (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K (File No. 001-37785), filed with the SEC on December 7, 2016).

10.1+10.1		~~Indemnification~~First Amendment to Lease Agreement, ~~by and~~dated as of May 27, 2020.

10.2†#*		Common Stock Purchase Agreement between the Company and ~~Manmeet S. Soni~~BXLS V – River L.P, dated ~~August 28, 2019.~~as of June 10, 2020.

10.2+10.3†#		~~Employment~~Development and Commercialization Funding Agreement ~~by and~~ between the Company and ~~Manmeet S. Soni~~BXLS V – River L.P, dated ~~August 28, 2019.~~

10.3+*		~~Restricted Stock Unit Agreement.~~as of June 10, 2020.

10.4+*		~~Notice~~Fourth Amended and Restated Non-Employee Director Compensation Policy, dated as of ~~Grant of Restricted Stock Units for employees.~~June 10, 2020.

~~10.5#~~10.5+		~~Amended~~Indemnification Agreement by and ~~Restated License Agreement,~~between the Company and Martin W. Edwards, dated as of ~~October 9, 2019~~August 3, 2020 (incorporated by reference to Exhibit 10.1 to the ~~Company’s~~Company's Form 8-K (File No. 001-37785), filed with the SEC on ~~October 10, 2019).~~

~~10.6~~		~~First Amendment to Amended and Restated Loan and Security Agreement, dated as of October 9, 2019 (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K (File No. 0~~0~~1-37785), filed with the SEC on October 10, 2019).~~

~~10.7~~		~~Lease Agreement, dated as of October 15, 2019 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K (File No. 001-37785), filed with the SEC on October 16, 2019).~~

~~10.8~~		~~Expansion Agreement, dated as of October 15, 2019 (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K (File No. 001-37785), filed with the SEC on October 16, 2019).~~

~~10.9#~~		Fifth Supplement to Exclusive License and Supply Agreement, dated August 22, 2019, between Reata Pharmaceuticals, Inc. and Kyowa Kirin Co., Ltd (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K (File No. 001-37785), filed with the SEC on August 22, 2019).

~~10.10#~~		Sixth Supplement to Exclusive License and Supply Agreement, dated August 22, 2019, between Reata Pharmaceuticals, Inc. and Kyowa Kirin Co., Ltd (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K (File No. 001-37785), filed with the SEC on August 22, 2019)July 31, 2020).

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

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

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

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

101.INS*		Inline XBRL Instance Document

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 12, 2019~~August 10, 2020	REATA PHARMACEUTICALS, INC.

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

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