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 ~~4, 2020,~~3, 2021, the registrant had ~~28,836,422~~31,472,578 shares of Class A common stock, $0.001 par value per share, and ~~5,044,931~~4,919,249 shares of Class B common stock, $0.001 par value per share, outstanding.

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

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

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

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

Abbreviated Term		Defined Term
AbbVie		AbbVie Inc.
~~ADL~~		~~Activities of Daily Living questionnaire~~
ADPKD		Autosomal dominant polycystic kidney disease
AE		Adverse event
ALS		Amyotrophic lateral sclerosis
ASC		Accounting Standards Codification
ASU		Accounting Standards Update
ATP		Adenosine triphosphate
Bardoxolone		Bardoxolone methyl
BXLS		Blackstone Life Sciences, LLC
CARES Act		Coronavirus Aid, Relief, and Economic Security Act
~~CGIC~~		~~Clinical global impression of change~~
CKD		Chronic kidney disease
COVID-19		Coronavirus disease
CRO		Contract research organization
DPNP		Diabetic peripheral neuropathic pain
eGFR		Estimated glomerular filtration rate
EMA		European Medicines Agency
ESKD		End stage kidney disease
Exchange Act		Securities Exchange Act of 1934
FA		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
~~IST~~IRS		~~Investigator-Sponsored Trial~~Internal Revenue Service
~~KKC~~ITT		Intent to treat
Kyowa Kirin		Kyowa Kirin Co., Ltd.
MAA		Marketing Authorization Application
mFARS		Modified Friedreich’s Ataxia Rating Scale
MHLW		Japanese Ministry of Health, Labour and Welfare
mITT		Modified ITT
NDA		New Drug Application
~~NYU~~PDUFA		~~New York University Grossman School of Medicine~~Prescription Drug User Fee Act
~~PGIC~~PK		~~Patient global impression of change~~Pharmacokinetic
Registrational trial		An adequate and well-controlled trial designed to be sufficient to apply for regulatory approval of a drug candidate, although notwithstanding the Company’s design a regulatory agency may determine that further clinical studies or data are required
REMS		Risk Evaluation and Mitigation Strategies
RSU		Restricted Stock Unit
SAE		Serious adverse event
~~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
UACR		Urinary albumin-to-creatinine ratio
U.S. GAAP		Accounting principles generally accepted in the United States

	September 30, 2020			December 31, 2019			September 30, 2021			December 31, 2020
	(unaudited)						(unaudited)
Assets
Cash and cash equivalents	$	578,263		$	664,324		$	713,212		$	818,150
Prepaid expenses and other current assets		6,566			4,952			8,450			6,960
Income tax receivable		22,203			0			—			22,228
Total current assets		607,032			669,276			721,662			847,338
Property and equipment, net		4,664			2,996			6,976			4,912
Other assets		1,301			10,148			3,209			5,348
Total assets	$	612,997		$	682,420		$	731,847		$	857,598
Liabilities and stockholders’ equity
Accounts payable		9,081			1,908			1,742			4,790
Accrued direct research liabilities		17,991			23,774			17,552			14,023
Other current liabilities		15,002			11,631			20,671			22,264
Current portion of payable to collaborators		0			150,000
Current portion of deferred revenue		4,688			4,701
Payable to collaborators								78,759			73,437
Deferred revenue								2,561			4,688
Total current liabilities		46,762			192,014			121,285			119,202
Other long-term liabilities		2,820			6,982			4,819			5,511
Term loan, net of debt issuance costs		0			155,017
Liability related to sale of future royalties, net		304,663			0			349,766			315,454
Payable to collaborators, net of current portion		71,726			66,862
Deferred revenue, net of current portion		1,182			4,688
Total noncurrent liabilities		380,391			233,549			354,585			320,965
Commitments and contingencies
Stockholders’ equity:
Common stock A, $0.001 par value: 500,000,000 shares authorized; issued and outstanding – 28,833,595 and 27,878,550 at September 30, 2020 and December 31, 2019, respectively		29			28
Common stock B, $0.001 par value: 150,000,000 shares authorized; issued and outstanding – 5,045,092 and 5,318,157 shares at September 30, 2020 and December 31, 2019, respectively		5			5
Common stock A, $0.001 par value: 500,000,000 shares authorized; issued and outstanding – 31,472,040 and 31,109,154 at September 30, 2021 and December 31, 2020, respectively								31			31
Common stock B, $0.001 par value: 150,000,000 shares authorized; issued and outstanding – 4,919,249 and 5,044,931 at September 30, 2021 and December 31, 2020, respectively								5			5
Additional paid-in capital		1,078,279			967,317			1,426,187			1,375,640
Accumulated deficit		(892,469	)		(710,493	)		(1,170,246	)		(958,245	)
Total stockholders’ equity		185,844			256,857			255,977			417,431
Total liabilities and stockholders’ equity	$	612,997		$	682,420		$	731,847		$	857,598

	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30						September 30						September 30						September 30
	2020			2019			2020			2019			2021			2020			2021			2020
Collaboration revenue
License and milestone	$	1,182		$	7,898		$	3,519		$	23,437		$	5,529		$	1,182		$	7,127		$	3,519
Other revenue		219			344			2,308			409			1,862			219			3,430			2,308
Total collaboration revenue		1,401			8,242			5,827			23,846			7,391			1,401			10,557			5,827
Expenses
Research and development		37,183			32,279			121,620			87,948			39,430			37,183			114,377			121,620
General and administrative		18,314			14,283			55,701			36,027			25,736			18,314			68,440			55,701
Depreciation		289			258			851			659			320			289			880			851
Total expenses		55,786			46,820			178,172			124,634			65,486			55,786			183,697			178,172
Other income (expense), net		(11,164	)		(1,078	)		(31,967	)		(2,380	)		(13,751	)		(11,164	)		(39,530	)		(31,967	)
Loss before taxes on income		(65,549	)		(39,656	)		(204,312	)		(103,168	)		(71,846	)		(65,549	)		(212,670	)		(204,312	)
Benefit from (provision for) taxes on income		93			(38	)		22,336			(60	)
Benefit from taxes on income														0			93			669			22,336
Net loss	$	(65,456	)	$	(39,694	)	$	(181,976	)	$	(103,228	)	$	(71,846	)	$	(65,456	)	$	(212,001	)	$	(181,976	)
Net loss per share—basic and diluted	$	(1.94	)	$	(1.32	)	$	(5.45	)	$	(3.44	)	$	(1.97	)	$	(1.94	)	$	(5.84	)	$	(5.45	)
Weighted-average number of common shares used in net loss per share basic and diluted		33,713,507			30,110,391			33,401,599			30,004,211			36,387,560			33,713,507			36,297,766			33,401,599

	Three Months Ended September 30, 2020																	Three Months Ended September 30, 2021
	Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’			Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital		Deficit			Equity			Shares		Amount		Shares			Amount		Capital		Deficit			Equity
Balance at June 30, 2020		28,526,532	$	29		5,058,319		$	5	$	1,058,606	$	(827,013	)	$	231,627
Balance at June 30, 2021																			31,454,329	$	31		4,924,479		$	5	$	1,412,193	$	(1,098,400	)	$	313,829
Net loss		—		—		—			—		—		(65,456	)		(65,456	)		—		—		—			—		—		(71,846	)		(71,846	)
Compensation expense related to stock options		—		—		—			—		11,580		—			11,580			—		—		—			—		13,657		—			13,657
Exercise of options		—		—		293,836			—		8,093		—			8,093			—		—		10,302			—		337		—			337
Issuance of common stock upon vesting of restricted stock units																			—		—		2,179			—		—		—			—
Conversion of common stock Class B to Class A		307,063		—		(307,063	)		—		—		—			—			17,711		—		(17,711	)		—		—		—			—
Balance at September 30, 2020		28,833,595	$	29		5,045,092		$	5	$	1,078,279	$	(892,469	)	$	185,844
Balance at September 30, 2021																			31,472,040	$	31		4,919,249		$	5	$	1,426,187	$	(1,170,246	)	$	255,977

Nine Months Ended September 30, 2020

Common Stock A

Common Stock B

Additional
Paid-In

Total
Accumulated

Total
Stockholders’

Shares

Amount

Shares

Amount

Capital

Deficit

Equity

Balance at December 31, 2019

27,878,550

$
28

5,318,157

$
5

$
967,317

$
(710,493
)

$
256,857

Net loss

—

—

—

—

$
—

(181,976
)

(181,976
)
Compensation expense
related to stock options

—

—

—

—

$
45,684

—

45,684

Exercise of options

—

—

341,187

—

$
9,879

—

9,879

Conversion of common stock
Class B to Class A

614,252

1

(614,252
)

—

$
—

—

1

Issuance of Common Stock

340,793

—

—

—

55,399

—

55,399

Balance September 30, 2020

28,833,595

$
29

5,045,092

$
5

$
1,078,279

$
(892,469
)

$
185,844

	Three Months Ended September 30, 2019																	Nine Months Ended September 30, 2021
	Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’			Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital		Deficit			(Deficit)			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 December 31, 2020																			31,109,154	$	31		5,044,931		$	5	$	1,375,640	$	(958,245	)	$	417,431
Net loss		—		—		—			—		—		(39,694	)		(39,694	)		—		—		—			—		—		(212,001	)		(212,001	)
Compensation expense related to stock options		—		—		—			—		5,380		—			5,380			—		—		—			—		41,580		—			41,580
Exercise of options		—		—		26,565			—		363		—			363			—		—		229,543			—		8,967		—			8,967
Issuance of common stock upon vesting of restricted stock units																			—		—		7,661			—		—		—			—
Conversion of common stock Class B to Class A		59,361		1		(59,361	)		—		—		—			1			362,886		—		(362,886	)		—		—		—			—
Balance at September 30, 2019		24,525,768	$	25		5,598,731		$	6	$	456,097	$	(523,551	)	$	(67,423	)
Balance at September 30, 2021																			31,472,040	$	31		4,919,249		$	5	$	1,426,187	$	(1,170,246	)	$	255,977

Nine Months Ended September 30, 2019

Common Stock A

Common Stock B

Additional
Paid-In

Total
Accumulated

Total
Stockholders’

Shares

Amount

Shares

Amount

Capital

Deficit

Equity (Deficit)

Balance at December 31, 2018

24,000,683

$
24

5,728,175

$
6

$
435,452

$
(420,323
)

$
15,159

Net loss

—

—

—

—

—

(103,228
)

(103,228
)
Compensation expense
   related to stock options

—

—

—

—

14,090

—

14,090

Exercise of options

—

—

395,641

—

6,448

—

6,448

Conversion of common stock
   Class B to Class A

525,085

1

(525,085
)

—

—

—

1

Other shareholder
   transactions

—

—

—

—

107

—

107

Balance at September 30, 2019

24,525,768

$
25

5,598,731

$
6

$
456,097

$
(523,551
)

$
(67,423
)

	Three Months Ended September 30, 2020
	Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital		Deficit			Equity
Balance at June 30, 2020		28,526,532	$	29		5,058,319		$	5	$	1,058,606	$	(827,013	)	$	231,627
Net loss		—		—		—			—		—		(65,456	)		(65,456	)
Compensation expense related to stock options		—		—		—			—		11,580		—			11,580
Exercise of options		—		—		293,836			—		8,093		—			8,093
Conversion of common stock Class B to Class A		307,063		—		(307,063	)		—		—		—			—
Balance at September 30, 2020		28,833,595	$	29		5,045,092		$	5	$	1,078,279	$	(892,469	)	$	185,844

	Nine Months Ended September 30, 2020
	Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital		Deficit			Equity
Balance at December 31, 2019		27,878,550	$	28		5,318,157		$	5	$	967,317	$	(710,493	)	$	256,857
Net loss		—		—		—			—		—		(181,976	)		(181,976	)
Compensation expense related to stock options		—		—		—			—		45,684		—			45,684
Exercise of options		—		—		341,187			—		9,879		—			9,879
Conversion of common stock Class B to Class A		614,252		1		(614,252	)		—		—		—			1
Issuance of Common Stock		340,793		—		—					55,399					55,399
Balance at September 30, 2020		28,833,595	$	29		5,045,092		$	5	$	1,078,279	$	(892,469	)	$	185,844

	Nine Months Ended						Nine Months Ended
	September 30						September 30
	2020			2019			2021			2020
Operating activities
Net loss	$	(181,976	)	$	(103,228	)	$	(212,001	)	$	(181,976	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		851			659			880			851
Amortization of debt issuance costs and implied interest		5,850			1,017
Amortization of debt issuance costs and imputed interest								5,322			5,850
Non-cash interest expense on liability related to sale of future royalty		11,077			0			34,312			11,077
Stock-based compensation expense		45,684			14,090			41,580			45,684
Loss on extinguishment of debt		11,183			0			0			11,183
Gain on lease termination		(816	)		0			0			(816	)
Changes in operating assets and liabilities:
Income tax receivable		(22,203	)		0
Prepaid expenses and other current assets and other assets		150			(1,879	)
Income tax receivable and payable								22,228			(22,203	)
Prepaid expenses, other current assets and other assets								(1,471	)		150
Accounts payable		7,033			(440	)		(3,117	)		7,033
Accrued direct research, other current, and long-term liabilities		(514	)		11,442
Accrued direct research, other current and long-term liabilities								1,625			(514	)
Payable to collaborators		(150,000	)		0			0			(150,000	)
Deferred revenue		(3,519	)		(23,437	)		(2,127	)		(3,519	)
Net cash used in operating activities		(277,200	)		(101,776	)		(112,769	)		(277,200	)
Investing activities
Purchases of property and equipment		(539	)		(2,420	)		(1,136	)		(539	)
Net cash used in investing activities		(539	)		(2,420	)		(1,136	)		(539	)
Financing activities
Proceeds from issuance of common stock, net		55,398			0			0			55,398
Payments on long-term debt		(167,170	)		0			0			(167,170	)
Exercise of options		9,879			6,448			8,967			9,879
Proceeds from sale of future royalties, net		293,571			107			0			293,571
Net cash provided by financing activities		191,678			6,555			8,967			191,678
Net decrease in cash and cash equivalents		(86,061	)		(97,641	)		(104,938	)		(86,061	)
Cash and cash equivalents at beginning of year		664,324			337,790			818,150			664,324
Cash and cash equivalents at end of period	$	578,263		$	240,149		$	713,212		$	578,263
Supplemental disclosures
Cash paid for interest	$	8,021		$	6,226		$	0		$	8,021
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations	$	0		$	8,262
Purchases of equipment in accounts payable, accrued direct research, other current, and long-term liabilities	$	2,282		$	145		$	4,239		$	2,282

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 neurological ~~disease. The Company announced positive topline data from registrational trials for both of~~disease, and its lead product candidates are bardoxolone methyl (bardoxolone) in patients with CKD caused by Alport syndrome and omaveloxolone in patients with a neurological disorder called Friedreich’s ataxia (FA). The Company has an NDA under review with the FDA for bardoxolone in patients with CKD caused by Alport syndrome and plans to file an NDA for omaveloxolone in patients with 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, omaveloxolone, and ~~omaveloxolone~~our next-generation Nrf2 activators have many potential clinical applications. Reata possesses 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 Kyowa Kirin Co., Ltd. ~~(KKC)~~(Kyowa Kirin).

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 months ended September 30, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2020.~~2021. The consolidated balance sheet at December 31, ~~2019,~~2020, 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 significant accounting policies used in the preparation of these condensed consolidated financial statements for the ~~three and~~ nine months ended September 30, ~~2020~~2021 are consistent with those discussed in Note 2 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, except as noted below with respect to the Company’s liability related to the 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 based2020.

on the Company’s current estimate of future royalties expected to be paid over the estimated term of the Development Agreement. The Company will periodically assess the expected royalty payments and, if materially different than its previous estimate, will prospectively adjust and recognize the related non-cash interest expense. ~~The transaction costs associated with the liability will be amortized to 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 this Quarterly Report on Form 10-Q.~~

The 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 the asset or liability. The three levels of the fair value hierarchy are as follows:

The Company has determined the fair value of the liability related to the sale of future royalties is based on the Company’s current estimates of future royalties expected to be paid to BXLS, over the life of the arrangement, which are considered Level 3. See Note 5, ~~Liability Related to Sale of Future Royalties, of Notes to Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.~~

~~In February 2016, the Financial Accounting Standards Board (FASB) issued Topic 842, amended by ASU 2018-11,~~ ~~Leases~~ (Topic 842): Targeted 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 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.

~~In November 2018, the FASB issued ASU No. 2018-18,~~ ~~Collaborative Arrangements~~ ~~(Topic 808) (ASU 2018-18). This update provides clarification on the interaction between~~ ~~Revenue 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, 2019, and early adoption is permitted. The Company adopted this standard on January 1, 2020 and its adoption did not have a material impact on 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 adoption. The Company adopted this standard on January 1, 2020 and its adoption did not have material impact to the Company’s consolidated financial statements and related disclosure.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income ~~Taxes~~.Taxes. The ~~Board~~FASB issued this ~~Update~~update as part of its Simplification Initiative to improve areas of U.S. GAAP and reduce cost and complexity while maintaining usefulness. The main provision that impacts the Company is the removal of the exception to the incremental approach of intra-period tax allocation when there is a loss from continuing operations and income or gain from other items. ASU 2019-12 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2020. ~~Early adoption is permitted, including adoption in an interim period.~~ The Company ~~is currently evaluating~~adopted this standard on January 1, 2021, and its adoption did not have material impact to the ~~impact of adopting this guidance on its~~Company’s consolidated financial statements. and related disclosure.

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

In December 2009, the Company entered into an exclusive license with Kyowa Kirin to develop and commercialize bardoxolone in the licensed territory. The terms of the agreement include payment to the Company of a nonrefundable, up-front license fee of $35.0 million and additional development and commercial milestone payments. As of September 30, 2021, the Company has received $50.0 million related to regulatory development milestone payments from Kyowa Kirin and has the potential in the future to achieve another $47.0 million from regulatory milestones and $140.0 million from commercial milestones. The Company also has the potential to achieve tiered royalties ranging from the low teens to the low 20 percent range, depending on the country of sale and the amount of annual net sales, on net sales by Kyowa Kirin in the licensed territory. The Company is participating on a joint steering committee with Kyowa Kirin to oversee the development and commercialization activities related to bardoxolone. Any future milestones and royalties received are subject to mid to lower single digit percent declining tiered commissions to certain consultants as compensation for negotiations of the Kyowa Kirin Agreement.

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

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

On July 27, 2021, Kyowa Kirin, submitted an NDA in Japan to the Ministry of Health, Labour and Welfare (MHLW) for bardoxolone for improvement of renal function in patients with Alport syndrome. Based on this submission, the Company earned a $5.0 million milestone payment, variable consideration previously considered constrained, under the Kyowa Kirin Agreement. As a result, the Company recorded $4.7 million in collaboration revenue, a cumulative catch-up for the portion of this milestone that was satisfied in prior periods, and $0.3 million in deferred revenue that will be recognized over the remaining performance obligation period, ending in June 2022.

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 (the ~~AbbVie~~ Collaboration Agreement) to jointly research, develop, and commercialize the Company’s portfolio of second and later generation oral Nrf2 activators.

OnIn October 9, 2019, the Company and AbbVie entered into an Amended and Restated License Agreement (the Reacquisition Agreement) pursuant to which the Company reacquired the development, manufacturing, and commercialization rights concerning its proprietary Nrf2 activator product platform originally licensed to AbbVie in the AbbVie License Agreement and the ~~AbbVie~~ Collaboration Agreement. In exchange for such rights, the Company agreed to pay AbbVie $330.0 million, of which ~~$100.0~~total payments of $250.0 million ~~was paid~~have been made as of ~~December 31, 2019, $150.0 million was paid on June~~September 30, ~~2020, and~~2021, with the remaining $80.0 million ~~will be~~ payable on November 30, 2021. Additionally, the Company will pay AbbVie an escalating, low single-digit royalty on worldwide net sales, on a product-by-product basis, of omaveloxolone and certain next-generation Nrf2 activators. The execution of the Reacquisition Agreement ended our performance obligations under the Collaboration Agreement.

The Company recognized interest expense related to the Reacquisition Agreement of approximately ~~$1.7~~$1.8 million and $0$1.7 million, during the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$4.9~~$5.3 million and $0$4.9 million during the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. As of September 30, ~~2020,~~2021, the Company’s payable to collaborators was $80.0 million, with a present value of ~~$71.7~~$78.8 million.

The execution of the Reacquisition Agreement ended our performance obligations under the AbbVie 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 totaling approximately $6.7 million and $19.9 million during the three and nine months ended September 30, 2019, respectively. The deferred revenue balance was $0 million as of September 30, 2020.

In December 2009, the Company entered into an exclusive license with KKC (the KKC Agreement) to develop and commercialize bardoxolone in the licensed territory. The Company received a nonrefundable, up-front license fee of $35.0 million in 2009 and regulatory milestones totaling $45.0 million in 2010, 2012, and 2018 and could receive additional regulatory milestones of $52.0 million and commercial milestones of $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. The Company recognized collaboration revenue totaling approximately $1.2 million during each of the three months ended September 30, 2020 and 2019 and $3.5 million during each of the nine months ended September 30, 2020 and 2019. As of September 30, 2020, the

~~Company recorded deferred revenue totaling approximately $5.9 million of which approximately $4.7 million is reflected as the current portion of deferred revenue.~~

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

2019. On June 24, 2020, the Company paid off the total outstanding balance of the ~~Term Loans~~term loans under the Amended Restated Loan Agreement (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 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~~The Company ~~recorded a loss on extinguishment of debt of $11.2~~recognized approximately $0 million and $8.3 million in interest expense, during the three months and nine months ended September 30, 2020, respectively. NaN interest expense was recognized in 2021 as the term loan was paid off in June 2020.

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

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

The Company concluded that there were 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~~$294.5 million, which includes $0.8 million in transaction costs incurred, in transaction consideration to the liability, and $55.5 million to the common shares. The Company determined the fair value of the common shares based on the closing stock price on the June 24, 2020, the closing date of the Development Agreement. The effective interest rate under the Development Agreement, including transaction costs, is approximately 13.8%.

The following table shows the activity within the liability related to sale of future royalties for the nine months ended September 30, ~~2020:~~2021:

													Three Months Ended						Nine Months Ended
	Three Months Ended						Nine Months Ended						September 30						September 30
	September 30						September 30						2021			2020			2021			2020
	2020			2019			2020			2019			(in thousands)
Other income (expense), net
Investment income	$	104		$	1,311		$	2,660		$	4,812		$	38		$	104		$	130		$	2,660
Interest expense		(1,671	)		(2,389	)		(13,183	)		(7,199	)		(1,835	)		(1,671	)		(5,322	)		(13,183	)
Non-cash interest expense on liability related to sale of future royalty		(10,413	)		0			(11,077	)		0			(11,958	)		(10,413	)		(34,312	)		(11,077	)
Other income (expense)		816			0			(10,367	)		7			4			816			(26	)		816
Loss on extinguishment of debt														0			0			0			(11,183	)
Total other income (expense), net	$	(11,164	)	$	(1,078	)	$	(31,967	)	$	(2,380	)	$	(13,751	)	$	(11,164	)	$	(39,530	)	$	(31,967	)

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.~~Agreement and interest on its Term Loans in 2020.

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, sales~~exchange.

Other income of ~~assets, extinguishment~~$0.8 million recorded in the three and nine months ended September 30, 2020 related to a gain on the Company’s lease termination due to the bankruptcy filing of ~~debt, and lease termination.~~its lessor.

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.

~~In September 2020, the Company’s sublease agreement for its offices in Plano, Texas was terminated, resulting in recognition of a $0.8 million gain on lease termination. See Note 7,~~ ~~Leases, of Notes to Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.~~

The Company’s headquarters are located in Plano, Texas, where it leases approximately 122,000 square feet of office space. On September 2, 2020, the Company’s sublease agreement for its offices in Plano, Texas (the Sublease Agreement), was terminated due to the bankruptcy filing of its lessor. In connection with the termination, the Company was relieved from its obligations under the Sublease Agreement and derecognized the right-of-use asset of approximately $5.7 million and operating lease liabilities of approximately $6.5 million as of September 30, 2020, which resulted in a gain on lease termination of $0.8 million recorded in the three and nine months ended September 30, 2020. On October 1, 2020, the Company entered into a lease agreement with the owner of its offices in Plano, Texas (the Plano Lease Agreement),space, with lease terms extending through June 30, 2022 with an option to renew up to three months. ~~The Company will record approximately $4.8 million as a right-of-use asset and operating lease liabilities in October 2020.~~

The Company leases additional office and laboratory space of approximately 34,890 square feet located in Irving, Texas, with lease terms extending through ~~April 30,~~October 31, 2022 with an option to renew up to ~~four successive~~ ~~three-month~~ ~~periods.~~six months.

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. During the three and nine months ended September 30, 2021, cash paid for amounts included for the measurement of lease liabilities was $0.8 million and $2.4 million, respectively. During the three and nine months ended September 30, 2021, the Company recorded operating lease expense of $0.8 million and $2.4 million, respectively.

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

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

The Company has an additional lease of a single-tenant, build-to-suit building of approximately 327,400 square feet of office and laboratory space located in Plano, Texas with an initial lease term of 16 years. The Company entered into the lease agreement on October 15, 2019 (the 2019 Lease Agreement), and at the Company’s

option, it may renew the lease for two consecutive five-year renewal periods or one ten-year renewal period. The Company does not have 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 2019 Lease Agreement as of September 30, ~~2020.~~2021. 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~~$31.3 million, of which the Company has recorded a leasehold incentive obligation of approximately ~~$2.1~~$4.1 million as other long-term liabilities as of September 30, ~~2020.~~

~~At September 30, 2020,~~2021. The initial annual base rent will be determined based on the ~~weighted average incremental borrowing rate and~~project cost, subject to an initial annual cap of approximately $13.3 million, which may increase in certain circumstances. Beginning in the ~~weighted average remaining~~third lease ~~term for~~year, the ~~operating leases held by~~base rent will increase 1.95% per annum each year. In addition to the annual base rent, the Company ~~were 9.6%~~will pay for taxes, insurance, utilities, operating expenses, assessments under private covenants, maintenance and ~~2.1 years, respectively. During the three~~repairs, certain capital repairs and ~~nine months ended September 30, 2020, cash paid for amounts included for the measurement of lease liabilities was $0.7 million~~replacements, and $2.7 million, respectively. During the three and nine months ended September 30, 2020, the Company recorded operating lease expense of $1.0 million and $2.8 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:~~

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

On March 27, 2020, the United States enacted the ~~Coronavirus Aid, Relief, and Economic Security Act (the~~ CARES ~~Act).~~Act. The CARES Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the U.S. economy and to provide assistance to individuals, families, and businesses affected by COVID-19. Accordingly, under its provisions, ~~for the nine months ended September 30,~~in March 2020, the Company recognized a tax ~~benefit~~benefits and ~~receivable of $22.1~~receivables totaling $22.2 million associated with the ability to carryback an applicable prior year’s net operating losses to a preceding year, ~~to generate~~which had previously been fully reserved by its valuation allowance. During the second quarter of 2021, the Company received a ~~refund.~~total of $22.9 million from the IRS, comprising $22.2 million of the income tax receivable plus $0.7 million in interest.

~~For the three months ended September 30, 2020, the Company’s~~The following table summarizes income tax (benefit) expense and effective income tax ~~rate was a benefit of 0.1% compared to an expense of 0.1% for the three months ended September 30, 2019.~~ rate:

The Company’s effective tax rate for the three months and nine months ended September 30, ~~2020~~2021, varies with the statutory rate primarily due to valuation allowances on deferred taxes. For the nine months ended September 30, 2020, the Company’s effective tax rate was a benefit of 10.9% compared to an expense of 0.1% for the nine months ended September 30, 2019. The Company’s effective tax rate for the nine months ended September 30, 2020 varies with the statutory rate primarily due to the favorable impact associated with the CARES Act and changes in the valuation allowance related to certain deferred tax assets generated or utilized in the applicable period.

Deferred tax assets are regularly reviewed for recoverability by jurisdiction and valuation allowances are established based on historical and projected future taxable losses and the expected timing of the reversals of existing temporary differences. The ~~Company’s~~Company has recorded valuation allowances against the majority of its deferred tax assets ~~for the United States have been fully offset by a valuation allowance at~~as of September 30, ~~2020,~~2021, and the Company expects to maintain ~~this~~these valuation ~~allowance~~allowances until there is sufficient evidence that future earnings can be achieved, which is uncertain at this time.

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

									Three Months Ended				Nine Months Ended
	Three Months Ended September 30				Nine Months Ended September 30				September 30				September 30
	2020		2019		2020		2019		2021		2020		2021		2020
	(in thousands)								(in thousands)
Research and development	$	4,279	$	1,885	$	23,322	$	5,235	$	5,403	$	4,279	$	17,474	$	23,322
General and administrative		7,301		3,495	$	22,362		8,855		8,254		7,301		24,106		22,362
	$	11,580	$	5,380	$	45,684	$	14,090
Total stock compensation expense									$	13,657	$	11,580	$	41,580	$	45,684

The following table summarizes ~~RSUs~~RSU activity as of September 30, ~~2020,~~2021, under the Second Amended and Restated Long Term Incentive Plan (LTIP Plan) agreement:

	Number of RSUs		Weighted-Average Grant Date Fair Value		Number of RSUs			Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2020		50,000	$	72.70
Outstanding at January 1, 2021						108,551		$	115.54
Granted		41,776	$	163.31		301,366			120.25
Vested		0	$	0		(7,661	)		174.67
Forfeited		0	$	0		(34,710	)		127.57
Outstanding at September 30, 2020		91,776	$	113.94
Outstanding at September 30, 2021						367,546		$	117.03

As of September 30, ~~2020, the performance targets for the~~2021, total unrecognized compensation expense related to RSU and performance-based RSUs ~~have~~awards that were deemed probable of vesting was approximately $10.1 million, which excludes 278,100 shares of unvested performance-based RSUs that were deemed not ~~been met. Accordingly, the total~~probable of vesting totaling unrecognized stock-based compensation expense ~~related to these performance-based RSUs is approximately $4.2~~of $31.4 million. ~~As of September 30, 2020, the Company recognized $0.7 million in compensation expense related to time-based RSUs.~~

The following table summarizes stock option activity as of September 30, ~~2020, and changes during the nine months ended September 30, 2020,~~2021, under the LTIP Plan and standalone option agreements:

	Number of Options			Weighted-Average Exercise Price		Number of Options			Weighted- Average Price
Outstanding at January 1, 2020		4,038,949		$	41.24
Outstanding at January 1, 2021							4,306,269		$	79.47
Granted		1,045,699		$	199.49		914,179			123.78
Exercised		(341,187	)	$	29.67		(229,543	)		39.09
Forfeited		(183,209	)	$	95.97		(237,872	)		126.23
Expired		(250	)	$	207.20		(47,518	)		203.57
Outstanding at September 30, 2020		4,560,002		$	76.19
Exercisable at September 30, 2020		2,244,139		$	38.84
Outstanding at September 30, 2021							4,705,515		$	86.43
Exercisable at September 30, 2021							2,637,621		$	53.51

Stock-based compensation expense for the ~~three and~~ nine months ended September 30, ~~2020,~~2021 included accelerated recognition of expense of $1.4 million, due to modifications of outstanding stock options as a result of ~~the death of~~ an ~~executive and employees~~employee who entered into a consulting ~~agreements~~agreement at the termination of employment, which ~~were~~was considered to be non-substantive services. ~~Accordingly, the Company recognized $0.0 million and $10.0 million for the three and nine months ended September 30, 2020, respectively.~~

As of September 30, ~~2020, the Company has~~2021, total unrecognized compensation expense related to stock options was approximately ~~288,000~~$106.6 million, which excludes 479,350 shares of unvested performance-based stock options ~~for which the performance targets have~~that were deemed not ~~been met. Accordingly, the total~~probable of vesting totaling unrecognized stock-based compensation expense ~~related to these performance-based stock options is approximately $34.1~~of $48.5 million.

The total intrinsic value of all outstanding options and exercisable options atas of September 30, ~~2020~~2021 was ~~$203.6~~$176.8 million and ~~$142.3~~$151.7 million, respectively.

The number of weighted average options that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive represented 4,705,515 and 4,560,002 shares as of September 30, 2021 and 2020, respectively.

In 2010, we adopted an Employee Investment Plan, qualified under Section 401(k) of the Internal Revenue Code, which is a retirement savings plan covering substantially all of our U.S. employees (the Plan). The Plan is administered under the “safe harbor” provision of ERISA. Under the Plan, an eligible employee may elect to contribute a percentage of their salary on a pre-tax basis, subject to federal statutory limitations. Beginning in January 2019, the Company implemented a discretionary employer matching contribution of $1.00 for every $1.00 contributed by a participating employee up to $6,000 and $5,000 annually in 2021 and 2020, respectively, which such matching contributions become fully vested after four years of service. The Company recorded expense of $0.2 million and $0.1 million for the three months ended September 30, 2021 and 2020, respectively, and $1.4 million and $1.0 million for the nine months ended September 30, 2021 and 2020, respectively, which includes the Company’s contributions and administrative costs.

From time to time, the Company is a party to legal proceedings in the course of its business, including the matters described below. The claims and legal proceedings in which the Company could be involved include challenges to the scope, validity or enforceability of patents relating to its product candidates, and challenges by it to the scope, validity or enforceability of the patents held by others. These may include claims by third parties that the Company infringes their patents. The outcome of any such legal proceedings, regardless of the merits, is inherently uncertain. In addition, litigation and related matters are costly and may divert the attention of our management and other resources that would otherwise be engaged in other activities. If the Company were unable to prevail in any such legal proceedings, its business, results of operations, liquidity and financial condition could be adversely affected. The Company recognizes accruals for litigations to the extent that it can conclude that a loss is both probable and reasonably estimable and recognizes legal expenses as incurred.

On October 15, 2020, Toshif Patel (the Plaintiff) filed a complaint for alleged violation of federal securities laws against the Company, its Chief Executive Officer and its Chief Financial Officer in the United States District Court for the Eastern District of Texas. The complaint purports to bring a federal securities class action on behalf of a class of persons who acquired the Company’s common stock between October 15, 2019 and August 7, 2020. The complaint alleges, among other things, that the defendants made false and misleading statements regarding the sufficiency of its MOXIe Part 2 study results to support a single study marketing approval of omaveloxolone for the treatment of FA in the United States. The plaintiff seeks, among other things, the designation of this action as a class action, an award of unspecified compensatory damages and interest, costs, and expenses, including counsel fees and expert fees. On September 27, 2021, the plaintiff voluntarily dismissed the case with prejudice.

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

As permitted under Delaware law and in accordance with the Company’s bylaws, officers and directors are indemnified for certain events or occurrences, subject to certain limits, while the officer or director is or was serving in such capacity. The maximum amount of potential future indemnification is unlimited; however, the Company has obtained director and officer insurance that limits its exposure and may enable recoverability of a portion of any future amounts paid. The Company believes ~~that~~ the ~~allegations contained in~~fair value for these indemnification obligations is minimal. Accordingly, the ~~complaint are without merit and intends~~Company has not recognized any liabilities relating to ~~defend the case vigorously. The Company cannot predict at this point the length of time that this action will be ongoing or the liability, if any, which may arise therefrom.~~

~~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

2020

2019

2020

2019

(in thousands, except share and per share data)

Numerator

Net loss

$
(65,456
)

$
(39,694
)

$
(181,976
)

$
(103,228
)
Denominator

Weighted-average number of common shares
used in net loss per share – basic

33,713,507

30,110,391

33,401,599

30,004,211

Dilutive potential common shares

0

0

0

0

Weighted-average number of common shares
used in net loss per share – diluted

33,713,507

30,110,391

33,401,599

30,004,211

Net loss per share – basic

$
(1.94
)

$
(1.32
)

$
(5.45
)

$
(3.44
)
Net loss per share – diluted

$
(1.94
)

$
(1.32
)

$
(5.45
)

$
(3.44
)

~~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 4,560,002 and 4,272,757 shares~~these obligations as of September 30, ~~2020~~2021.

The Company has certain agreements with licensors, licensees, collaborators, and ~~2019, respectively.~~

~~See Note 7,~~ ~~Leases~~,vendors that contain indemnification provisions. In such provisions, the Company typically agrees to indemnify the licensor, licensee, collaborator, or vendor against certain types of ~~Notes~~third-party claims. The Company accrues for known indemnification issues when a loss is probable and can be reasonably estimated. There were 0 accruals for expenses related to ~~Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.~~indemnification issues for any period presented.

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

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

We are a clinical-stage biopharmaceutical company focused on identifying, developing, and commercializing innovative therapies that change patients’ lives for the better. We concentrate on small-molecule therapeutics with novel mechanisms of action for the treatment of severe, life-threatening diseases with few or no approved therapies. Our lead programs are in rare forms of ~~chronic kidney disease (CKD)~~CKD and a rare neurological disease. We have ~~announced positive topline data from registrational trials~~an NDA under review with the FDA for ~~both of our lead product candidates,~~ bardoxolone ~~methyl (bardoxolone)~~ in patients with CKD caused by Alport syndrome and plan to file an NDA for omaveloxolone in patients with a neurological 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.~~Kyowa Kirin.

~~On November 9, 2020, we announced that~~In April 2021, the ~~Phase 3 CARDINAL study~~FDA accepted for filing the NDA for bardoxolone for the treatment of ~~bardoxolone in~~ patients with CKD caused by Alport syndrome, ~~met its primary~~ which is currently under review by the FDA. The FDA completed a bioresearch monitoring inspection of Reata. We did not receive any observations.

We also completed a mid-cycle communication meeting with the FDAand ~~key secondary endpoints at~~were advised that an Advisory Committee meeting is scheduled for December 8, 2021. The Prescription Drug User Fee Act (PDUFA) date, the ~~end~~FDA action date for the application, is scheduled for February 25, 2022.

We are pursuing marketing approvals outside of ~~Year 2. At Week 100,~~the United States. On October 28, 2021, we announced our submission of our Marketing Authorization Application (MAA) with the European Medicines Agency (EMA) for marketing approval of bardoxolone for the treatment of CKD caused by Alport syndrome in the ~~intent-to-treat (ITT) population,~~European Union. On July 27, 2021, Kyowa Kirin, our strategic collaborator in CKD in Japan, submitted an NDA in Japan to the Ministry of Health, Labour and Welfare (MHLW) for bardoxolone for improvement of renal function in patients with Alport syndrome, which ~~included eGFR values for~~is currently under review.

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

We are currently enrolling patients ~~who either remained on~~in FALCON, an international, multi-center, randomized, double-blind, placebo-controlled Phase 3 trial studying the safety and efficacy of bardoxolone in patients with ADPKD randomized one-to-one to active drug or ~~have discontinued~~placebo. The study ~~drug,~~is enrolling patients ~~treated~~in a broad range of ages, 18 to 70 years old, with ~~bardoxolone had a statistically significant improvement compared to placebo in mean change from baseline in~~an estimated glomerular filtration rate (eGFR) ~~of 7.7~~between 30 to 90 mL/min/1.73 m² ~~(p=0.0005)~~. InWe are preparing a protocol amendment for FALCON following the ~~modified ITT (mITT) analysis, which assessed~~Type B meeting with the ~~effect~~FDA regarding the ADPKD development program as outlined in our Quarterly Report on Form 10-Q for the second quarter of ~~receiving~~2021 and as follows. The primary endpoint is the off-treatment eGFR change from baseline versus placebo at Week 104. We increased the sample size from 550 to 700 patients to account for this dilution in the treatment ~~by excluding values after patients discontinued treatment, patients~~effect.

Patients will be treated with bardoxolone ~~had~~or placebo for 100 weeks followed by a ~~statistically significant improvement compared~~four-week withdrawal period. There will be no off-treatment period from Week 48 to ~~placebo in mean~~Week 52. The trial will remain blinded until study completion. The key secondary endpoint is the eGFR change from baseline versus placebo at Week 100.

More than 450 patients are currently enrolled in the study, and we expect to complete enrollment by the middle of 2022.

MERLIN is a multi-center, double-blind, placebo-controlled, Phase 2 trial to evaluate the safety and efficacy of bardoxolone in patients at risk of rapidly progressing CKD due to multiple etiologies including IgA Nephropathy (IgAN), focal segmental glomerulosclerosis (FSGS), type 1 diabetic CKD (T1D CKD), type 2 diabetic CKD (T2D CKD), hypertensive CKD, and others. The primary endpoint of the trial is change in eGFR atfrom baseline to Week ~~100 of 11.3 mL/min/1.73 m~~² ~~(p<0.0001). At Week 104 (four weeks after last dose in second year of treatment), patients~~12. We have completed enrollment in the ~~ITT population treated with bardoxolone had a statistically significant improvement compared~~MERLIN trial and expect to ~~placebo in mean change from baseline in eGFR of 4.3 mL/min/1.73 m~~² (p=0.023). Bardoxolone treatment was generally reported to be well-tolerated. Based on these positive results and following a recently completed pre-NDA meeting with the U.S. Food and Drug Administration (FDA), we plan to proceed with the submission of an NDA for full marketing approval in the United Stateshave top-line data in the first quarter of ~~2021. We also plan~~2022. If the results of this study are positive, we would potentially proceed to ~~pursue marketing approval outside~~a larger Phase 3 trial with similar eligibility criteria. Patients at risk for rapid progression experience a significant risk of progressing to end-stage kidney disease (ESKD) and are a population with high unmet need across multiple forms of CKD.

On September 30, 2021, we announced that we completed our pre-NDA meeting with the FDA for omaveloxolone for the treatment of patients with FA. The purpose of the ~~United States and work has commenced on preparations~~pre-NDA meeting was to ~~file~~discuss the content of Reata’s planned NDA submission for ~~marketing~~full approval ~~in Europe.~~

~~Additionally, we provided data on kidney function from patients with Alport syndrome from EAGLE, a long-term extension study~~for omaveloxolone for the treatment of bardoxolone in patients with rare forms of CKD. Change from baseline in eGFR has been assessed for 14 patients with Alport syndrome who were treated with bardoxolone for three years, with four-week off-treatment periods occurring at Weeks 48 and 100. Bardoxolone treatment resulted in a mean increase from baseline in eGFR of 11.5 mL/min/1.73 m² ~~at Year 1, 13.3 mL/min/1.73 m~~² ~~at Year 2, and 11.0 mL/min/1.73 m~~² ~~at Year 3.~~

~~As previously announced, at a Type C meeting, the FDA provided us guidance that although it does~~FA. We are not ~~have any concerns with the reliability of the modified Friedreich’s Ataxia Rating Scale (mFARS) primary endpoint~~

results from the registrational Part 2 of the MOXIe trial (Part 2) of omaveloxolone in FA patients, it was not convinced that the results from Part 2 support a single study approval. The FDA stated that we will needplanning to conduct a second ~~pivotal trial that confirms~~pre-approval clinical study prior to the ~~mFARS results of Part 2 with a similar magnitude of effect. As an alternative, Reata proposed a second study (the Baseline-Controlled Study, previously called~~NDA submission. In response to our questions about the ~~crossover study) in which patients serve as their own controls, and changes in mFARS during the pre-treatment period in either Part 1 or Part 2~~contents of the ~~MOXIe study are compared to changes in mFARS during the treatment period in the open-label extension study (MOXIe Extension). The design~~filing, and because of the ~~Baseline-Controlled Study was discussed and agreed upon by external experts and Reata, and~~seriousness of the ~~statistical analysis plan (SAP) was submitted to~~indication, the FDA ~~prior~~exercised its discretion, subject to ~~conducting the analysis contemplated by the proposed plan. The FDA acknowledged it would consider the study design but,~~review, to ~~date, it has not provided comments on the study design.~~

The Baseline-Controlled Study met its primary endpoint of paired difference in annualized mFARS slope with a statistically significant 3.76 point improvement (p=0.0022) between the treatment and pre-treatment periods in the primary analysis population. Further, all sensitivity analyses of the primary analysis showed a significant treatment effect. Thus, we believe thatpermit us to submit the results of certain clinical pharmacology and nonclinical studies after approval. We continue to work with the ~~Baseline-Controlled Study support~~FDA as we finalize the ~~positive mFARS results~~NDA package for submission during the first quarter of ~~Part 2 and provide additional evidence of the effectiveness of omaveloxolone in FA.~~2022.

We ~~completed the Baseline-Controlled Study in October 2020~~continue to closely monitor and ~~provided the results~~adhere to COVID-19 guidance issued by local, state, and national authorities. Since May 2021, we have permitted employees to voluntarily return to the ~~FDA. The FDA confirmed~~office on flexible work schedules. Due to the current Covid-19 pandemic situation, we have not committed to a formal return to the office date and are asking employees to continue to work with management on schedules that ~~it will review~~meet both Reata’s and the study results and may request a meeting with us to discuss the conclusions of its review. If the FDA views these results as sufficient to increase the persuasiveness of data from Part 2, our plan would be to submit an NDAemployee’s needs. Pandemic management protocols remain in mid-2021. However, there can be no assurance that the FDA will accept the design of the Baseline-Controlled Study or view these results as sufficient, in which case we will determine next steps, including whether it is feasible to conduct a second pivotal study in patients with FA as previously suggested by the FDA. At present, we plan to pursue marketing approval outside of the United States and work has commenced on preparations to fileplace for ~~marketing approval in Europe.~~those who do attend either campus.

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

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

*NDA under review. NDA accepted for filing on April 26, 2021, with a PDUFA date of February 25, 2022.

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

**~~See discussion below under “Regulatory Update on Omaveloxolone for Friedreich’s Ataxia”~~

~~Clinical Studies Adapted for Continuity During COVID-19~~*DPNP: Diabetic peripheral neuropathic pain

As the coronavirus disease (COVID-19) emerged as a pandemic with serious public health implications during the first quarter of 2020, we undertook a series of measures to protect the health and safety of patients and health care workers involvedPrograms 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 and arranged for home delivery of the study drug to patients. We issued an addendum to the SAP to accommodate COVID-19 impact. We continue to utilize these measures to ensure continued access to drug treatment and appropriate safety monitoring.

We are developing bardoxolone for the treatment of patients with ~~certain rare forms of~~ CKD ~~including~~caused by Alport syndrome, ADPKD, and certain other ~~rare~~ forms of CKD that, in the aggregate, affect more than 700,000 patients in the United States. CKD is characterized by a progressive worsening in glomerular filtration rate (GFR), which is the rate at which the kidney filters waste products from the ~~blood, called the glomerular filtration rate (GFR).~~blood. When GFR drops below approximately 15 mL/min/1.73 m², patients develop ~~end-stage kidney disease (ESKD)~~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 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.

Alport syndrome is a rare, genetic form of CKD caused by mutations in the genes encoding type IV collagen, which is a major structural component of the glomerular basement membrane in the kidney. The kidneys of patients with Alport syndrome progressively lose the capacity to filter waste products out of the blood, which can lead to ESKD and the need for chronic dialysis treatment or a kidney transplant. Alport syndrome affects both children and adults. In patients with the most severe forms of the disease, approximately 50% progress to dialysis by age 25, 90% by age 40, and nearly 100% by age 60. ~~According to the~~

The Alport Syndrome Foundation estimates that Alport syndrome affects approximately 30,000 to 60,000 people in the United States. ~~There~~According to data provided by IQVIA in April 2020, there are ~~currently no approved therapies to treat~~approximately 14,000 projected patients diagnosed with Alport syndrome in all stages of CKD ~~caused by~~in the United States. However, recent literature suggests that a large number of patients with Alport ~~syndrome.~~syndrome are either undiagnosed or misdiagnosed with other forms of CKD. To help nephrologists identify the genetic basis of various forms of CKD, including Alport syndrome, Reata and Invitae Corporation are sponsoring the KIDNEYCODE® genetic testing program.

OnIn November 9, 2020, we announced that the Phase 3 CARDINAL study ~~of bardoxolone in patients with CKD caused by Alport syndrome~~ met its primary and key secondary endpoints at the end of Year 2. The Phase 3 portion of CARDINAL was an international, multi-center, double-blind, placebo-controlled, randomized registrational trial that enrolled 157 patients with CKD caused by Alport syndrome at approximately 50 study sites in the United States, Europe, Japan, and Australia. Patients were randomized one-to-one to bardoxolone or placebo.

At Week 100, in the ~~ITT~~intent to treat (ITT) population, which included eGFR values for patients who either remained on or discontinued study drug, patients treated with bardoxolone had a statistically significant improvement compared to placebo in mean change from baseline in eGFR of 7.7 mL/min/1.73 m² (p=0.0005). Patients treated with bardoxolone experienced a mean change from baseline in eGFR of -0.8 mL/min/1.73 m², while patients treated with placebo experienced a mean change from baseline in eGFR of -8.5 mL/min/1.73 m².

In the ~~mITT~~modified ITT (mITT) analysis, which assessed the effect of receiving treatment by excluding values after patients discontinued treatment, patients treated with bardoxolone had a statistically significant improvement compared to placebo in mean change from baseline in eGFR at Week 100 of 11.3 mL/min/1.73 m² (p<0.0001). In the mITT analysis, patients treated with bardoxolone experienced a mean increase from baseline in eGFR of 1.7 mL/min/1.73 m², while patients treated with placebo experienced a mean decline from baseline in eGFR of -9.6 mL/min/1.73 m².

At Week 104 (four weeks after last dose in second year of treatment), patients in the ITT population treated with bardoxolone had a statistically significant improvement compared to placebo in mean change from baseline in eGFR of 4.3 mL/min/1.73 m² (p=0.023). Patients treated with bardoxolone experienced a mean change from baseline in eGFR of -4.5 mL/min/1.73 m², while patients treated with placebo experienced a mean change from baseline in eGFR of -8.8 mL/min/1.73 m².

~~Efficacy~~The primary endpoint was ~~observed across~~analyzed using mixed-model repeated measures with no imputation, and the key secondary endpoint was analyzed using analysis of covariance with treatment-based multiple subgroups at Week 100 and Week 104, including pediatric patients and patients with different genetic subtypes of Alport syndrome. The largest treatment effect at Week 104 was observed in the pediatric subgroup where the difference between treatment groups was 14.6 mL/min/1.73 m² ~~(p=0.004). The risk of kidney failure events (defined as ESKD, confirmed 30% eGFR decline, or confirmed eGFR < 15~~

~~mL/min/1.73 m~~²~~) was reduced by approximately 50% in bardoxolone-treated patients (9 patients versus 17 patients in placebo, with a hazard ratio of 0.49 and a p-value of 0.086).~~imputation for missing data.

Bardoxolone was generally reported to be well tolerated in this study, and the safety profile was similar to that observed in prior trials. ~~Seventy-five~~Eight patients ~~(97%~~(10%) receiving bardoxolone and 7715 patients ~~(96%~~(19%) receiving placebo experienced ana treatment-emergent serious adverse event ~~(AE)~~(SAE). ~~Ten~~No SAEs were reported in pediatric patients ~~(13%) receiving bardoxolone~~treated with bardoxolone. No fluid overload SAEs or major adverse cardiac events were reported in patients treated with bardoxolone. Blood pressure, a sensitive measure of fluid status, was not significantly different between the two groups. Weight loss was more pronounced in patients with a higher body mass index, and ~~four patients (5%) receiving placebo discontinued study drug due to an AE, and no individual AE contributed to more than two discontinuations~~mean decreases in ~~either group.~~ weight were not observed in pediatric patients. The urinary albumin-to-creatinine ratio (UACR) was not significantly different between treatment groups at Week 100 or Week 104.

The reported ~~AEs~~adverse events (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 muscle spasms and increases in aminotransferases ~~and~~which are thought to be associated with the pharmacology of the drug. Muscle spasms were generally transient and were associated with reductions of creatine kinase, which is evidence of improved energy metabolism and inconsistent with muscle injury.

~~Eight patients (10%) receiving~~Additionally, an update on results from EAGLE was provided during ASN Kidney Week 2021, which was held virtually from November 4 - 7, 2021. EAGLE is an ongoing, international, multi-center, open-label, extended access trial evaluating the longer-term safety and tolerability of bardoxolone and 15 patients (19%) receiving placebo experienced a treatment-emergent serious adverse event (SAE). No SAEs were reported in pediatric patients treated with bardoxolone. No fluid overload or major adverse cardiac events were reported in patients ~~treated~~ with bardoxolone. Blood pressure was not significantly different between the two groups. The urinary albumin-to-creatinine ratio (UACR) was not significantly different between treatment groups at Week 100 or Week 104. Non-kidney symptoms associated withCKD caused by Alport syndrome ~~including psychiatric, hearing, vestibular, and ocular AEs, occurred less frequently~~who participated in ~~bardoxolone-treated patients.~~the CARDINAL trial or patients with ADPKD who participated in the FALCON trial.

~~We also reported results from the EAGLE study, in which the~~The change from baseline in eGFR was ~~assessed~~evaluated for 14the patients with Alport syndrome who were treated with bardoxolone for up to three years (two years in CARDINAL and one year in EAGLE), with four-week ~~off treatment~~off-treatment periods occurring at Weeks 48 and 100. ~~Bardoxolone~~Mean increases in eGFR were observed in patients who previously received placebo and initiated treatment with bardoxolone in EAGLE. Patients who previously received bardoxolone for two years in CARDINAL also continued to experience mean increases in eGFR in their third year of treatment.

For the 19 patients randomized to bardoxolone in CARDINAL who completed 48 weeks in EAGLE (bardoxolone-to-bardoxolone group), bardoxolone treatment resulted in a mean ~~increase~~change from baseline in eGFR (relative to original CARDINAL Phase 3 baseline) of ~~11.5~~7.8 mL/min/1.73 m² at Year 1, 8.6 mL/min/1.73 m² at Year 2, and 6.2 mL/min/1.73 m² at Year 3. This sustained improvement of kidney function is notable when compared to the CARDINAL study population’s expected yearly eGFR decline of 5.1 mL/min/1.73 m², which was calculated based on five-year historical eGFR data collected before patients entered the study.

The change from baseline eGFR was also evaluated at ~~Year 1, 13.3 mL/min/1.73 m~~²Week 12, Week 24, and Week 48 relative to Day 0 (before treatment) in EAGLE. The bardoxolone-to-bardoxolone and placebo-to-bardoxolone groups experienced similar increases in eGFR at ~~Year 2, and 11.0 mL/min/1.73 m~~² ~~at Year 3.~~all time points.

~~We recently completed the previously announced pre-NDA meeting with~~In April 2021, the FDA ~~to discuss~~accepted for filing the NDA ~~submission content and plans. Based on that meeting and~~for bardoxolone for the ~~FDA’s responses and the subsequently announced positive results~~treatment of ~~the Year 2 data of the CARDINAL Phase 3 study, we plan to proceed with an NDA filing for full marketing approval of bardoxolone in~~ patients with CKD caused by Alport syndrome, which is currently under review by the FDA. The FDA completed a bioresearch monitoring inspection of Reata. We did not receive any observations.

We also completed a mid-cycle communication meeting with the FDA and were advised that an Advisory Committee meeting is scheduled for December 8, 2021. The PDUFA date, the FDA action date for the application, is scheduled for February 25, 2022.

We are pursuing marketing approvals outside of the United States. On October 28, 2021, we announced our submission of our MAA with the EMA for marketing approval of bardoxolone for the treatment of CKD caused by Alport syndrome in the ~~first~~European Union.

On July 27, 2021, Kyowa Kirin, our partner in Japan, submitted an NDA in Japan to the MHLW for bardoxolone for improvement of renal function in patients with Alport syndrome. Based on this submission, we earned a $5 million milestone payment under the Kyowa Kirin Agreement related to this event, which we received and recognized in the third quarter of 2021. ~~We will also continue preparations~~If approved for commercial sales, Kyowa Kirin is required to ~~file for marketing approval~~pay us royalties on net sales of bardoxolone in ~~Europe.~~its territory ranging from the low teens to the low 20% range depending on the country of sale and the amount of annual net sales.

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

ADPKD is a rare and serious hereditary form of CKD caused by a genetic defect in PKD1 or PKD2 genes leading to the formation of fluid-filled cysts in the kidneys and other organs. Cyst growth can cause the kidneys to expand up to five to seven times their normal volume, leading to pain and progressive loss of kidney function. ADPKD affects both men and women of all racial and ethnic groups and is the leading inheritable cause of kidney failure with an estimated diagnosed population of 140,000 patients in the United States. Despite current standard of care treatment, an estimated 50% of ADPKD patients progress to ESKD and require dialysis or a kidney transplant by 60 years of age.

~~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 m~~² ~~(p<0.0001) after 12 weeks of treatment in 31~~We are currently enrolling patients ~~with ADPKD. Available historical data for 29 of these patients showed an average annual decline in eGFR of 4.8 mL/min/1.73 m~~² in the three-year period prior to study entry. The FDA has provided us with written guidance that, in patients with 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, 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.~~ADPKD randomized one-to-one to active drug or placebo. The ~~trial will enroll~~study is enrolling patients in a broad range of ~~patients from~~ages, 18 to 70 years old, with an eGFR between 30 to 90 mL/min/1.73 m²m². We are preparing a protocol amendment for FALCON following the Type B meeting with the FDA regarding the ADPKD development program as outlined in our Quarterly Report on Form 10-Q for the second quarter of 2021 and as follows. The ~~enrollment~~primary endpoint is the off-treatment eGFR change from baseline versus placebo at Week 104. The changed primary endpoint includes data at Week 104 for all patients irrespective of ~~new~~time off-treatment, instead of the off-treatment value four weeks after last dose. Patients who discontinue treatment early will have shortened treatment exposure and longer off-treatment duration, which, therefore is expected to dilute the treatment effect. We increased the sample size from 550 to 700 patients ~~was temporarily paused~~to account for this dilution in ~~March of 2020 due~~the treatment effect.

Patients will be treated with bardoxolone or placebo for 100 weeks followed by a four-week withdrawal period. There will be no off-treatment period from Week 48 to ~~safety concerns related~~Week 52. The trial will remain blinded until study completion. The key secondary endpoint is the eGFR change from baseline versus placebo at Week 100. We will also add a Week 108 off-treatment eGFR analysis to the ~~COVID-19 global pandemic. We began to lift~~study.

More than 450 patients are currently enrolled in the screening hold in FALCON in June 2020, and currently, most sites are able to screen and randomize patients. The measures we implemented to the conduct of FALCON in response to COVID-19 have been effective,study, and we ~~anticipate no meaningful impact on data integrity due~~expect to ~~COVID-19.~~

Three additional rare forms of CKD were studied in PHOENIX, including IgA nephropathy (IgAN), type 1 diabetic CKD (T1D CKD), and focal segmental glomerulosclerosis (FSGS). In each of these Phase 2 cohorts, bardoxolone demonstrated a statistically significant increase from baseline in mean eGFR after 12 weeks of treatment. We plan to pursue each of these rare and serious forms of CKD as commercial indications.

The FDA has granted orphan drug designation to bardoxolone for the treatment of Alport syndrome and ADPKD, and the European Commission has granted orphan drug designation to bardoxolone for the treatment of Alport syndrome.2022.

~~We plan to evaluate the potential effect of bardoxolone in CKD patients at risk of rapid disease progression. This~~MERLIN is a multi-center, double-blind, placebo-controlled, Phase 2 trial ~~is currently being developed~~ to evaluate the safety and efficacy of bardoxolone in patients at risk of rapidly progressing CKD due to multiple etiologies including IgAN, FSGS, T1D CKD, T2D CKD, hypertensive CKD, and others. The study includes patients with eGFR between 20 and 60 mL/min/1.73 m², and patients must meet at least one of the following criteria: UACR ≥ 300 mg/g; eGFR decline at a rate of ≥ 4 mL/min/1.73 m² in prior year; or hematuria defined as > 5-10 red blood cells per high power field (manual method), documented history of positive urinary dipstick for blood in prior year, or macroscopic hematuria in prior 3 years. The primary endpoint of the trial is change in eGFR from baseline to Week 12.

We have completed enrollment in the MERLIN trial. We expect to have top-line data in the first quarter of 2022. If the results of this study are positive, we would potentially proceed to a larger Phase 3 trial with similar eligibility criteria. Patients at risk for rapid progression experience a significant risk of progressing to ESKD and are a population with high unmet need across multiple forms of CKD.

Both the FALCON and MERLIN trials draw from the results of our Phase 2 study called PHOENIX, an open-label, multi-center Phase 2 trial evaluating the safety and efficacy of bardoxolone in patients with CKD secondary to a variety of etiologies who are at risk of rapid progression. The study will require patients to have at least one of several risk factors for rapid progression of kidney disease prior to study enrollment. Patients with eGFR as low as 20 and as high as 60 mL/min/1.73 m² ~~will be enrolled in the study and the treatment duration will be 12 weeks.~~

~~Investigator-Sponsored BARCONA Study of Bardoxolone in Patients with COVID-19~~

Researchers at NYU Grossman School of Medicine (NYU) have initiated an 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, have been shown to 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 CKD where approximately 1,800 were exposed to bardoxolone treatment.

The Phase 2 BARCONA study is a randomized, double-blind trial that will enroll approximately 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 eGFR <30 mL/min/1.73 m². To further mitigate any safety risk, the trial was designed to pause after the enrollment of five patients to assess safety. The first five patients were enrolled, and the Executive Steering Committee reviewed the blinded safety data and decided to continue with enrollment. 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 member 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.

Clinical trials enrolling over 2,000 patients exposed to 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 numerous patient populations treated with bardoxolone, including patients with CKD caused by type 2 diabetes (T2D CKD), Alport syndrome, ADPKD, IgAN, T1D CKD, or FSGS completed in 2019. In each of these cohorts, patients treated with bardoxolone experienced a statistically significant mean increase from baseline in eGFR after 12 weeks of treatment. 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 treatment-emergent SAEs, none of which were reported as related to bardoxolone. We plan to pursue development opportunities in each of these rare and ~~FSGS.~~

We believe these data, in addition to the CARDINAL Phase 3 Year 2 data, support the potential for bardoxolone to delay or prevent dialysis, kidney transplant, and death in patients with Alport syndrome and otherserious forms of ~~CKD.~~ CKD, maintaining our intent to expand the commercial indications for bardoxolone.

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

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

Our Phase 2 trial, called MOXIe, was a two-part, international, multi-center, randomized, double-blind, placebo-controlled registrational trial that studied the safety and efficacy of omaveloxolone in patients with FA. Additionally, patients who completed the study and met eligibility requirements could participate in the MOXIe Extension during which investigators and patients remained blinded to prior treatment assignments. In October 2019, we announced that Part 2 in patients with FA met its primary endpoint of change in ~~mFARS~~Modified Friedreich’s Ataxia Rating Scale (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). Patients treated with omaveloxolone demonstrated improvement relative to placebo in every subcategory measured under mFARS. Omaveloxolone treatment was generally reported to be well-tolerated.

Following the announcement of the positive data from Part 2 in October 2019, we have planned, subject to discussion with the FDA, to proceed with a submission for marketing approval of omaveloxolone for the treatment of FA in the United States. As previously announced, at a Type C meeting, theThe FDA provided us guidance that, although it ~~does~~did not have ~~any~~ concerns with the reliability of the mFARS primary endpoint results infrom MOXIe Part 2, it was not convinced that the results from MOXIe Part 2, ~~support~~as a single study, were sufficient to support approval. The FDA stated that we ~~will~~would need to conduct a second pivotal trial that confirms the mFARS results of MOXIe Part 2 with a similar magnitude of effect. As an alternative, ~~Reata proposed~~to increase the ~~Baseline-Controlled Study~~persuasiveness of MOXIe Part 2 results, we completed additional analyses, including the Delayed-Start Analyses.

During the first quarter of 2021, we submitted results from the Delayed-Start Analyses to the FDA. These additional exploratory analyses analyzed data from MOXIe Part 2 and the MOXIe Extension. In these analyses, parallel trajectories between the patients randomized to placebo (placebo-to-omaveloxolone group) and those randomized to omaveloxolone (omaveloxolone-to-omaveloxolone group) in ~~which patients served as their own controls by comparing their treatment~~the double-blind period ~~during~~from MOXIe Part 2 through 48 weeks in the MOXIe Extension ~~with their pre-treatment period in either~~could provide evidence of disease-modifying activity. A total of 73 out of 75 (97%) patients without pes cavus who completed MOXIe Part 1 of the MOXIe study (Part 1) or Part 2. The design of the Baseline-Controlled Study was discussed and agreed upon by external experts and Reata, and the SAP was submitted to the FDA prior to conducting the analysis contemplated by

~~the proposed plan. The FDA acknowledged it would consider the study design but, to date, it has not provided comments on the study design.~~

~~The Baseline-Controlled Study evaluated the efficacy of omaveloxolone treatment using a baseline-controlled analysis design from patients in Part 1 and patients assigned to the placebo-arm of Part~~ 2 ~~who were~~ enrolled in the MOXIe Extension. ~~Efficacy was assessed by comparing~~On September 10, 2021, we presented a poster at the ~~annualized rate of change in mFARS during the pre-treatment period~~International Parkinson and Movement Disorder Society Virtual Congress with an update to the Delayed-Start Analyses increasing from 9 to 13 patients in the placebo-to-omaveloxolone group and increasing from 11 to 17 patients in the omaveloxolone-to-omaveloxolone group. A longitudinal analysis used to calculate annualized ~~rate of change in mFARS during the treatment period for patients who received approximately 48 weeks of omaveloxolone in~~slopes incorporating all available data from the MOXIe Extension ~~(the paired difference). The pre-treatment period for Part 1 patients is the period from enrollment~~showed similar slopes in ~~Part 1 to enrollment in the MOXIe Extension. The pre-treatment period for Part 2 patients is the 48-week treatment period, during which they received placebo in Part 2.~~

~~The primary efficacy analyses were analyzed according to a statistical hierarchy. The primary analysis population included Part 1 and Part 2 patients without pes cavus who had an~~ mFARS ~~assessment at Week 48 of the MOXIe Extension. The Part 2 placebo population was then analyzed separately followed by the Part 1 population.~~

~~The Baseline-Controlled Study demonstrated statistically significant evidence of efficacy (p=0.0022)~~ for the ~~primary endpoint of~~placebo-to-omaveloxolone group (0.29 ± 0.68 points per year) when compared to the paired difference in annualized mFARS slopes between the treatment and pre-treatment periods in the primary analysis population (Table 1, Hierarchy 1). Evaluation of the data for patients from Part 2 and Part 1, separately, also demonstrated a statistically significant treatment effect, consistentomaveloxolone-to-omaveloxolone group (0.17 ± 0.61 points per year) with the primary analysis of the Baseline-Controlled Study and Part 2. All three analysis populations, including the primary analysis population, the Part 2 placebo population, and the Part 1 population, on average, demonstrated worsening (positive slope) during the pre-treatment period and an improvement (negative slope) during the treatment period. There was no significant difference between slopes (p=0.85). The resulting parallel trajectories between both treatment groups are consistent with disease-modifying activity.

On September 30, 2021, we announced that we completed our pre-NDA meeting with the ~~paired differences~~FDA for omaveloxolone for the treatment of patients ~~from Part 1 and Part 2 (two-sample t-test, p=0.53), confirming suitability for pooling for the primary analysis population (Part 1 and Part 2 combined).~~

Sensitivity analyses were performed to assess multiple alternate methods for calculating slope and comparing treatment and pre-treatment periods. Additionally, analyses were performed using the all enrolled population, which included patients with ~~and without pes cavus. All of these analyses consistently demonstrated a significant treatment effect and upheld the conclusion~~FA. The purpose of the ~~primary analysis.~~

In conclusion, the Baseline-Controlled Study met its primary endpoint of paired difference in annualized mFARS slope with a statistically significant paired difference between the treatment and pre-treatment periods in the primary analysis population of a 3.76 improvement (p=0.0022), and all sensitivity analyses of the primary analysis showed a significant treatment effect. Thus, we believe that the results of the Baseline-Controlled Study, which utilized patients as their own control, support the positive mFARS results of Part 2 and provide evidence of the effectiveness of omaveloxolone in FA.

~~We completed the Baseline-Controlled Study in October 2020 and provided the results to the FDA. The FDA confirmed that it will review the study results after which it may request a~~pre-NDA meeting ~~with us~~was to discuss the ~~conclusions~~content of ~~its review. Assuming that~~Reata’s planned NDA submission for full approval for omaveloxolone for the ~~FDA views these results as sufficient to increase the persuasiveness~~treatment of data from Part 2, our plan would be to submit an NDA in mid-2021. However, there can be no assurance that the FDA will accept the design of the Baseline-Controlled Study or view these results as sufficient to support submission of an NDA for approval of omaveloxolone without the conduct of a second study. In that event, we will determine next steps, including whether it is feasibleFA. We are not planning to conduct a second ~~pivotal~~pre-approval clinical study ~~in FA patients~~prior to ~~confirm~~the NDA submission. In response to our questions about the contents of the filing, and because of the seriousness of the indication, the FDA exercised its discretion, subject to review, to permit us to submit the results of ~~Part 2~~certain clinical pharmacology and nonclinical studies after approval. We continue to work with the FDA as ~~previously suggested by~~we finalize the ~~FDA. At present, we plan to pursue marketing approval outside~~NDA package for submission during the first quarter of ~~the United States and work has commenced on preparations to file for marketing approval in Europe.~~2022.

In September 2020, additional data analyses from Part 2 were presented at the American Academy of Neurology’s Emerging Science conference and the FARA 2020 Biomarker & Clinical Endpoint Meeting by Dr. David Lynch, M.D., Ph.D. Dr. Lynch is an attending physician at the Children’s Hospital of Philadelphia, professor of neurology at the Perelman School of Medicine at the University of Pennsylvania, and the principal investigator of the MOXIe study. These analyses provided new insights that were not communicated previously in the announcement of topline results in 2019.

An analysis of the change in mFARS from baseline demonstrated that patients in the omaveloxolone arm performed numerically better than placebo on all subsections of the mFARS exam. Furthermore, omaveloxolone patients in subgroups that typically have a worse prognosis and progress faster, including patients with longer GAA1 repeats, patients with cardiomyopathy, non-ambulatory patients, and younger patients, on average, experienced a larger placebo-corrected improvement in mFARS compared to the study population as a whole.

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

~~In October 2020, the results from Part 2 evaluating the efficacy and safety of omaveloxolone in patients with FA were published in the journal~~ ~~Annals of Neurology~~.

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

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

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

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

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

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

We ~~have~~ completed a Phase 1 single and multiple ascending dose trial of oral, once-daily RTA 901 in healthy adult volunteers to evaluate the safety, tolerability, and pharmacokinetic ~~profile~~(PK) profile. The PK was linear up to the highest doses evaluated with a half-life ranging from two to nine hours, and exposures were easily achievable in 10-fold excess of ~~RTA 901 administered orally, once-daily~~those necessary for efficacy in ~~healthy adult volunteers, and no~~multiple animal models. No safety or tolerability concerns were reported. WeDue to additional delays in clinical drug supply, we now plan to ~~continue development for~~initiate additional Phase 1 studies to evaluate the PK and drug-drug interaction potential of RTA 901 in ~~neurological diseases, such as~~the first half of 2022 and a randomized, placebo-controlled Phase 2 study in diabetic ~~neuropathy.~~peripheral neuropathic pain (DPNP) in the second half of 2022.

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

~~In addition, we~~We are ~~developing RTA 1701,~~actively building the ~~lead~~necessary commercial infrastructure in the United States to effectively support the commercialization of our product ~~candidate from our proprietary series of RORγt inhibitors,~~candidates, bardoxolone for the ~~potential~~ treatment of patients with CKD caused by Alport syndrome and omaveloxolone for the treatment of patients with FA. Our ability to launch bardoxolone and omaveloxolone is dependent on the acceptance and successful defense of an NDA and approval by the FDA.

The FDA has granted a ~~broad range~~PDUFA date of ~~autoimmune, inflammatory,~~February 25, 2022 for bardoxolone for the treatment of patients with CKD caused by Alport syndrome. If approved, we anticipate that bardoxolone will be our first US product launch, and ~~fibrotic diseases.~~our commercial readiness efforts align with this date. In the United States, our commercial leadership team is in place. We are expanding quality and compliance functions to support commercialization and are building the organization, infrastructure, systems, and processes necessary for the launch of bardoxolone, including sales, marketing, market access, patient support, and distribution. We recently hired a team of payer account directors focused on educating private and public payers about Alport syndrome, disease severity, and the need to treat diagnosed patients. Their role is to facilitate coverage and reimbursement of bardoxolone for Alport syndrome upon approval. We have ~~completed a Phase 1 trial~~hired our regional business directors who will be responsible for hiring our clinical sales specialists and for driving sales at approval.

Launch readiness efforts are underway for omaveloxolone for the treatment of patients with FA in the United States. We are efficiently building core functions for our bardoxolone program to ~~evaluate~~also support the ~~safety, tolerability,~~planned launch of omaveloxolone for FA, including shared distribution, access and ~~pharmacokinetic profile of RTA 1701 in healthy adult volunteers. No safety or tolerability concerns were reported,~~patient hub services, IT, insights, and analytics functions. Disease awareness efforts to help providers more quickly identify FA patients are underway, and we ~~observed an acceptable pharmacokinetic profile. We~~continue to engage with the patient community through multiple digital and social platforms.

If and when we receive regulatory approval for our product candidates, we plan to ~~continue development~~utilize a specialty pharmacy distribution model to support product availability to patients, with a patient-centered hub to support on-label utilization, ease of access, and patient education and compliance. We also completed preliminary field force sizing and structure for ~~RTA 1701 in autoimmune, inflammatory, or fibrotic diseases. We retain all rights~~our sales teams and have launched disease awareness campaigns to ~~our RORγt inhibitors, which are not subject to any existing commercial collaborations.~~

educate physicians about Alport syndrome and FA. Trade names for bardoxolone and omaveloxolone have been selected.

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,~~Kyowa Kirin, from sales of our securities, ~~with~~ secured loans, and ~~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,~~Kyowa Kirin, from the Development Agreement with BXLS, and from reimbursements of expenses under the terms of our agreement with ~~KKC.~~Kyowa Kirin. We have incurred losses in each year since our inception, other than in 2014. As of September 30, ~~2020,~~2021, we had ~~$578.3~~$713.2 million of cash and cash equivalents and an accumulated deficit of ~~$892.5~~$1,170.2 million. We continue to incur significant research and development and other expenses related to our ongoing operations. Despite contractual product development commitments and the potential to receive future payments from ~~KKC,~~Kyowa Kirin, we anticipate that we will continue to incur losses for the foreseeable future, and we anticipate that our losses will increase as we continue our development of, seek regulatory approval for, and ~~potential commercialization of~~potentially commercialize our product candidates. If we do not successfully develop and obtain regulatory approval of our existing product candidates or any future product candidates and effectively manufacture, market, and sell any products that are approved, we may never generate revenue from product sales. Furthermore, even if we do generate revenue from product sales, we may never again achieve or sustain profitability on a quarterly or annual basis. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital. Our failure to become and remain profitable could depress the market price of our Class A common stock and could impair our ability to raise capital, expand our business, diversify our product offerings, or continue our operations.

Our revenue to date has been generated primarily from licensing fees received under our collaborative license agreements and reimbursements for expenses. We currently have no approved products and have not generated any revenue from the sale of products to date. In the future, we may generate revenue from product sales, royalties on product sales, reimbursements for collaboration services under our current collaboration agreements, or license fees, milestones, or ~~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~~Kyowa Kirin Agreement, the AbbVie License Agreement, and the ~~AbbVie~~ Collaboration Agreement and consists of upfront payments and milestone payments. License revenue recorded with respect to the ~~KKC~~Kyowa Kirin 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. Under the Reacquisition Agreement, we no longer have performance obligations under the AbbVie License Agreement and the ~~AbbVie~~ Collaboration Agreement. WeUnder the Kyowa Kirin Agreement, we only expect to recognize the deferred revenue through mid-2022.

On July 27, 2021, Kyowa Kirin submitted an NDA in Japan to the MHLW for bardoxolone for improvement of renal function in patients with Alport syndrome. Based on this submission, we earned a $5.0 million milestone payment, variable consideration previously considered constrained, under the ~~KKC Agreement, which extends through 2021.~~Kyowa Kirin Agreement. As a result, we recorded $4.7 million in collaboration revenue, a cumulative catch-up for the portion of this milestone that was satisfied in prior periods, and $0.3 million in deferred revenue that will be recognized over the remaining performance obligation period, ending in June 2022.

The largest component of our total operating expenses has historically been our investment in research and development activities, including the clinical development of our product candidates. From our inception through September 30, ~~2020,~~2021, we have incurred a total of ~~$896.6~~$1,048.3 million in research and development expense, a majority of which relates to the development of bardoxolone and omaveloxolone. We expect our research and development expense to continue to increase in the future as we advance our product candidates through clinical trials and expand our product candidate portfolio. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and we consider the active management and development of our clinical pipeline to be crucial to our long-term success. The actual probability of success for each product candidate and

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

Research and development 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)~~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 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~~Kyowa Kirin has allowed us to conduct clinical studies of bardoxolone in certain rare forms of kidney diseases in Japan and has reimbursed us the majority of the costs for our CARDINAL study in Japan and is paying for the costs of a certain number of patients as the in-country caretaker in our FALCON study in Japan. ~~We reduced our expenses by $0.0 million and $0.5 million for KKC’s share of CARDINAL costs for the nine months ended September 30, 2020 and 2019, respectively.~~

	Three Months Ended September 30				Nine Months Ended September 30				Three Months Ended				Nine Months Ended
	2020		2019		2020		2019		September 30				September 30
	(unaudited; in thousands)								2021		2020		2021		2020
Bardoxolone methyl	$	14,113	$	12,511	$	37,765	$	31,904
									(in thousands)
Bardoxolone									$	13,634	$	14,113	$	40,000	$	37,765
Omaveloxolone		5,770		5,999		20,711		17,478		3,475		5,770		6,429		20,711
RTA 901		1,527		560		3,489		1,616		1,164		1,527		4,991		3,489
RTA 1701		152		452		2,026		1,433
Other research and development expenses		15,621		12,757		57,629		35,517		21,157		15,773		62,957		59,655
Total research and development expenses	$	37,183	$	32,279	$	121,620	$	87,948	$	39,430	$	37,183	$	114,377	$	121,620

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 research and development 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 prepare for our 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,~~premiums, legal, audit and tax fees, compliance with the Sarbanes-Oxley Act of 2002, regulatory compliance programs, and investor relations costs. Additionally, if and when we believe the first regulatory approval of one of our product candidates appears likely, we anticipate an increase in payroll and related expenses as a result of our preparation for commercial operations, especially for the sales and marketing of our product candidates.

Other income (expense) includes interest and gains earned on our cash and cash equivalents, interest expense on ~~term loans,~~our Term Loans, amortization of debt issuance costs, imputed interest on long term payables, loss on extinguishment of debt, gain on termination of lease, 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~~Benefit from 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~~Realization of deferred tax assets inis generally dependent upon future earnings by jurisdiction, of which the ~~United States.~~timing and amount are uncertain for the majority of our deferred tax assets, and valuation allowances are maintained against them. Changes in ~~this~~ valuation ~~allowance~~allowances also affect the tax provision.

Comparison of the Three Months Ended September 30, ~~2020~~2021, and ~~2019~~2020 (unaudited)

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

	2020			2019			Change $			Change %			2021			2020			Change $			Change %
	(in thousands)												(in thousands, except for percentage data)
Collaboration revenue
License and milestone	$	1,182		$	7,898		$	(6,716	)		(85	)	$	5,529		$	1,182		$	4,347			368
Other revenue		219			344			(125	)		(36	)		1,862			219			1,643		**
Total collaboration revenue		1,401			8,242			(6,841	)		(83	)		7,391			1,401			5,990			428
Expenses
Research and development		37,183			32,279			4,904			15			39,430			37,183			2,247			6
General and administrative		18,314			14,283			4,031			28			25,736			18,314			7,422			41
Depreciation		289			258			31			12			320			289			31			11
Total expenses		55,786			46,820			8,966			19			65,486			55,786			9,700			17
Other income (expense), net		(11,164	)		(1,078	)		(10,086	)	**				(13,751	)		(11,164	)		(2,587	)		(23	)
Loss before taxes on income		(65,549	)		(39,656	)		(25,893	)		(65	)		(71,846	)		(65,549	)		(6,297	)		(10	)
Benefit from (provision for) taxes on income		93			(38	)		131		**
Benefit from taxes on income														—			93			(93	)		(100	)
Net loss	$	(65,456	)	$	(39,694	)	$	(25,762	)		(65	)	$	(71,846	)	$	(65,456	)	$	(6,390	)		(10	)
** Percentage not meaningful

License and milestone revenue represented approximately ~~84%~~75% and ~~96%~~84% of total revenue for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and consisted ~~primarily~~ of the recognition of Kyowa Kirin deferred revenue. ~~License~~The increase in license and milestone revenue ~~decreased by $6.7~~is primarily due to the achievement of a regulatory milestone, variable consideration previously considered constrained, under the Kyowa Kirin Agreement. As a result, we recorded $4.7 million ~~or 85%~~in collaboration revenue, a cumulative catch-up for the portion of this milestone that was satisfied in prior periods.

Other revenue increased during the three months ended September 30, ~~2020,~~2021, compared to the three months ended September 30, ~~2019,~~2020, primarily due to ~~the Reacquisition Agreement~~an increase in ~~October 2019, which ended our performance obligations under the AbbVie Collaboration Agreement and resulted in the writing off~~reimbursements 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 September 30, 2020~~expenses from ~~deferred revenue related to the KKC Agreement.~~

~~Other revenue was immaterial~~Kyowa Kirin for ~~the three months ended September 30, 2020 and 2019.~~manufacturing expenses incurred.

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

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

	2020		% of Total Expenses			2019		% of Total Expenses			2021		% of Total Expenses			2020		% of Total Expenses
	(in thousands)										(in thousands, except for percentage data)
Research and development	$	37,183		66	%	$	32,279		68	%	$	39,430		60	%	$	37,183		66	%
General and administrative		18,314		33	%		14,283		31	%		25,736		39	%		18,314		33	%
Depreciation		289		1	%		258		1	%		320		1	%		289		1	%
Total expenses	$	55,786				$	46,820				$	65,486				$	55,786

Research and development expenses increased by ~~$4.9~~$2.2 million, or ~~15%~~6%, for the three months ended September 30, ~~2020,~~2021, compared to the three months ended September 30, ~~2019.~~2020. The increase was primarily due to ~~$5.1 million in~~ increased ~~personnel-related stock-based compensation expenses related to the growth of our development activities~~personnel and ~~$2.1 million in increased manufacturing and regulatory~~personnel-related costs to support the product ~~registration~~development activities, offset by a decrease in ~~clinical study expenses~~spend related to ~~studies terminated in the first quarter 2020; and $1.9 million in decreased medical affairs expenses.~~ manufacturing activities of omaveloxolone.

Research and development expenses, as a percentage of total expenses, was ~~66%~~60% and ~~68%~~66% for the three months ended September 30, 2021 and 2020, respectively. The decrease of 6% was due to the proportionately larger increase in general and ~~2019, respectively.~~ administrative expenses, which was primarily due to increased commercial readiness activities.

General and administrative expenses increased by ~~$4.0~~$7.4 million, or ~~28%~~41%, for the three months ended September 30, ~~2020,~~2021, compared to the three months ended September 30, ~~2019.~~2020. The increase was primarily due to ~~$4.9 million in~~ increased spend related to commercial readiness activities and personnel and ~~stock-based compensation expenses, offset by a decrease of $0.7 million~~personnel-related costs to support growth in ~~marketing and commercialization expenses.~~ our development activities.

General and administrative expenses, as a percentage of total expenses, was ~~33%~~39% and ~~31%~~33%, for the three months ended September 30, 2021 and 2020, respectively. The increase of 6% was due to the proportionately larger increase in general and ~~2019, respectively.~~ administrative expenses, compared to research and development expenses.

Other income (expense), net increased by ~~$10.1~~$2.6 million for the three months ended September 30, ~~2020,~~2021, compared to the three months ended September 30, ~~2019.~~2020. The increase was primarily due to ~~$10.4 million from~~an increase in non-cash interest expense on liability related to the sale of future royalties.

Benefit from taxes on income was immaterial for the three months ended September 30, ~~2020~~2021 and ~~2019.~~2020.

Comparison of the Nine Months Ended September ~~30,~~2021, and 2020 ~~and 2019~~ (unaudited)

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

	2020			2019			Change $			Change %			2021			2020			Change $			Change %
	(in thousands)												(in thousands, except for percentage data)
Collaboration revenue
License and milestone	$	3,519		$	23,437		$	(19,918	)		(85	)	$	7,127		$	3,519		$	3,608			103
Other revenue		2,308			409			1,899		**				3,430			2,308			1,122			49
Total collaboration revenue		5,827			23,846			(18,019	)		(76	)		10,557			5,827			4,730			81
Expenses
Research and development		121,620			87,948			33,672			38			114,377			121,620			(7,243	)		(6	)
General and administrative		55,701			36,027			19,674			55			68,440			55,701			12,739			23
Depreciation		851			659			192			29			880			851			29			3
Total expenses		178,172			124,634			53,538			43			183,697			178,172			5,525			3
Other income (expense), net		(31,967	)		(2,380	)		(29,587	)	**				(39,530	)		(31,967	)		(7,563	)		(24	)
Loss before taxes on income		(204,312	)		(103,168	)		(101,144	)		(98	)		(212,670	)		(204,312	)		(8,358	)		(4	)
Benefit from (provision for) taxes on income		22,336			(60	)		22,396		**
Benefit from taxes on income														669			22,336			(21,667	)		(97	)
Net loss	$	(181,976	)	$	(103,228	)	$	(78,748	)		(76	)	$	(212,001	)	$	(181,976	)	$	(30,025	)		(16	)
** Percentage not meaningful

License and milestone revenue represented approximately ~~60%~~68% and ~~98%~~60% of total revenue for the nine months ended September 30, ~~2020,~~2021 and ~~2019,~~2020, respectively, and consisted ~~primarily~~ of the recognition of Kyowa Kirin deferred revenue. ~~License~~The increase in license and milestone revenue ~~decreased by $19.9~~is primarily due to the achievement of a regulatory milestone, variable consideration previously considered constrained, under the Kyowa Kirin Agreement. As a result, we recorded $4.7 million ~~or 85% during~~in collaboration revenue, a cumulative catch-up for the portion of this milestone that was satisfied in prior periods.

Other revenue increased in the nine months ended September 30, ~~2020,~~2021, compared to the nine months ended September 30, ~~2019,~~2020, 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 $3.5 million was recognized during the nine months ended September 30, 2020 from deferred revenue related to the KKC Agreement.

~~Other revenue increased by $1.9 million for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, primarily due to an~~ increase in reimbursements of expenses from ~~KKC~~Kyowa Kirin for manufacturing expenses incurred.

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

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

	2020		% of Total Expenses			2019		% of Total Expenses			2021		% of Total Expenses			2020		% of Total Expenses
	(in thousands)										(in thousands, except for percentage data)
Research and development	$	121,620		68	%	$	87,948		70	%	$	114,377		62	%	$	121,620		68	%
General and administrative		55,701		31	%		36,027		29	%		68,440		37	%		55,701		31	%
Depreciation		851		1	%		659		1	%		880		1	%		851		1	%
Total expenses	$	178,172				$	124,634				$	183,697				$	178,172

Research and development expenses ~~increased~~decreased by ~~$33.7~~$7.2 million, or ~~38%~~6%, for the nine months ended September 30, ~~2020,~~2021, compared to the nine months ended September 30, ~~2019.~~2020. The ~~increase~~decrease was primarily due to ~~$26.8 million in increased personnel-related expenses~~decreased manufacturing activities related to ~~the growth of our development~~omaveloxolone, offset by increased clinical activities related to bardoxolone and ~~accelerated recognition of~~RTA 901. The remaining changes included decreased stock-based compensation expense ~~as a result of the death of~~due to accelerated expense recognized during 2020, offset by an ~~executive~~increase in personnel and ~~employees who entered into consulting agreements at the termination of employment; $11.1 million in increased manufacturing and regulatory~~personnel-related costs to support our product registration and increased clinical pharmacology and toxicity study expenses for our RTA 901 and RTA 1701 programs, which were offset by a decrease in clinical study expenses related to studies terminated in the first quarter 2020; and $4.6 million in decreased medical affairs and research expenses. development activities.

Research and development expenses, as a percentage of total expenses, was ~~68%~~62% and ~~70%~~68% for the nine months ended September 30, 2021 and 2020, respectively. The decrease of 6% was due to the proportionately larger increase in general and ~~2019, respectively.~~administrative expenses, which was primarily due to commercial readiness activities.

General and administrative expenses increased by ~~$19.7~~$12.7 million, or ~~55%~~23%, for the nine months ended September 30, ~~2020,~~2021, compared to the nine months ended September 30, ~~2019.~~2020. The increase was primarily due to ~~$19.0 million in~~ increased spend related to commercial readiness activities, personnel and ~~stock-based compensation expenses, $0.9 million~~personnel-related costs to support growth in ~~increased~~our development activities, and insurance ~~expenses, which were offset by a $0.2 million in marketing and commercialization expenses.~~ premiums.

General and administrative expenses, as a percentage of total expenses, was ~~31%~~37% and ~~29%~~31%, for the nine months ended September 30, 2021 and 2020, respectively. The increase of 6% was due to the proportionately larger increase in general and ~~2019, respectively.~~administrative expenses, compared to research and development expenses.

Other income (expense), net increased by ~~$29.6~~$7.6 million for the nine months ended September 30, ~~2020,~~2021, compared to the nine months ended September 30, ~~2019.~~2020. The increase was primarily due to ~~$11.2 million from~~ ~~loss on~~ ~~debt extinguishment, $11.1 million from~~increased non-cash interest expense on liability related to the sale of future royalties and ~~$5.9 million of additional~~decreased interest income earned due to lower market rates, offset by decreased interest expense ~~attributable to additional borrowings under the Term B Loan drawn in December 2019~~ and ~~the payable~~loss on extinguishment of debt due to ~~collaborator related to~~ the ~~Reacquisition Agreement~~payoff on our Term Loans in ~~October 2019.~~2020.

Benefit from taxes on income ~~increased~~decreased by ~~$22.2~~$21.7 million for the nine months ended September 30, ~~2020,~~2021, compared to the nine months ended September 30, ~~2019. The increase was~~2020, primarily due to a tax ~~refund filed under the provisions of~~benefit recognized in 2020 related to a carryback claim associated with the 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 the sale of future royalties. Through September 30, ~~2020,~~2021, we have raised gross cash proceeds of $476.6 million through the sale of convertible preferred stock and ~~$780.0~~$785.0 million from payments under license and collaboration agreements. We also obtained ~~$944.7~~$1,222.1 million in net proceeds from our initial public offering, follow-on offerings, and the sale of our Class A common stock under the Purchase Agreement, and $299.0 million in net proceeds from the sale of future royalties under the Development Agreement. We ~~also obtained $151.6 million in net proceeds from our Amended Restated Loan Agreement, which we paid off in June 2020. We~~ have not generated any revenue from the sale of any products. As of September 30, ~~2020,~~2021, we had available cash and cash equivalents of approximately ~~$578.3~~$713.2 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 months ended September 30:

Net cash used in operating activities was $112.8 million for the nine months ended September 30, 2021, consisting primarily of a net loss of $212.0 million adjusted for non-cash items including stock-based compensation expense of $41.6 million, non-cash interest expense on liability related to sale of future royalty of $34.3 million, depreciation, amortization of issuance costs, and imputed interest expense of $6.2 million, and a net decrease in operating assets and liabilities of $17.1 million. The significant items in the change in operating assets that impacted our use of cash in operations include a decrease of $22.2 million in income tax receivable due to the receipt of a CARES Act refund, a decrease of $3.1 million in accounts payable due to timing of payments, and a decrease in deferred revenue of $2.1 million.

Net cash used in operating activities was $277.2 million for the nine months ended September 30, 2020, consisting primarily of a net loss of $182.0 million adjusted for non-cash items including stock-based compensation expense of $45.7 million, loss on extinguishment of debt of $11.2 million, non-cash interest expense on liability related to the sale of future ~~royalty~~royalties of $11.1 million, depreciation and amortization expense of $6.7 million, and a net increase in operating assets and liabilities of $169.1 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 $101.8 million for the nine months ended September 30, 2019, consisting primarily of a net loss of $103.2 million adjusted for non-cash items including stock-based compensation expense of $14.1 million, depreciation and amortization expense of $1.7 million, and a net decrease in operating assets and liabilities of $14.4 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 million primarily due to activities directly related to our clinical trials and other activities to support our registrational trials, an increase in prepaid expenses and other current assets of $1.9 million due to increases in prepaid subscriptions and insurance premiums, and decreases in amounts earned or due from collaboration agreements and deferred revenue of $23.4 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 million of license and milestone revenue.

Net cash used in investing activities consisted of ~~$0.5 million~~purchases of property and ~~$2.4 million~~equipment. Net cash used in investing activities for the nine months ended September 30, ~~2020 and~~ ~~2019, respectively,~~2021 were primarily ~~due~~related to ~~capital expenditures~~lab equipment and leasehold improvements under the 2019 Lease Agreement.

Net cash used in ~~connection with an expansion~~investing activities for the nine months ended September 30, 2020, was not significant.

Net cash provided by financing activities was $9.0 million for the nine months ended September 30, 2021, primarily consisting of ~~our office space and our purchase of property and equipment in 2019~~.

Net cash provided by financing activities was $191.7 million for the nine months ended September 30, 2020, primarily due to $55.4 million and $293.6 million in funding received from the Purchase Agreement and Development Agreement with BXLS, respectively, and $9.9 million from options exercised, offset by $167.2 million to pay off our Term Loans.

~~Net cash provided by financing activities of $6.6 million for the nine months ended September 30, 2019 were primarily due to stock 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, including those described under the heading “Risk Factors” included in our most recent Annual Report on Form 10-K, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. We continue to incur additional costs associated with operating as a public company. We anticipate that we will need substantial additional funding in connection with our continuing operations.

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

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

In October 1, 2020, we entered into a lease agreement with the ~~Plano Lease Agreement relating to~~owner of our headquarters and offices located in Plano, Texas, with lease terms extending through June 30, 2022 with an option to renew up to three months. We ~~will record~~recorded approximately $4.8 million as a right-of-use asset and lease liability in October 2020.

OnIn June ~~24,~~ 2020, we closed on the Development Agreement and Purchase Agreement, each dated June 10, 2020, under which certain ~~Blackstone~~BXLS entities paid us an aggregate of $350.0 million in exchange for future royalties on bardoxolone and an aggregate of 340,793 shares of our Class A common stock at $146.72 per share.

OnIn 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.

OnIn March ~~27,~~ 2020, the United States enacted the CARES Act. Under its provisions, ~~for the nine months ended September 30, 2020,~~ we recognized a tax benefit and receivable of ~~$22.1~~$22.2 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.

OnIn October ~~15,~~ 2019, we entered into the 2019 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.~~

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 Reacquisition Agreement pursuant to which we reacquired the development, manufacturing, and commercialization rights concerning 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 $330.0 million, of which ~~$100.0~~total payments of $250.0 million ~~was paid~~have been made as of ~~December 31, 2019, $150.0 million was paid on June~~September 30, ~~2020, and~~2021, with the remaining $80.0 million is payable on November 30, 2021. We will also pay AbbVie an escalating, low single-digit royalty on worldwide net sales, on a ~~product-by-~~

~~product~~product-by-product basis, of omaveloxolone and an identified list of certain next-generation Nrf2 activators. ~~The termination of our deferred revenue balance will not have an impact on our cash flow.~~

Our longer term liquidity requirements will require us to raise additional capital, such as through additional equity, debt, or royalty financings or collaboration arrangements. Our future capital requirements will depend on many factors, including the receipt of milestones under our ~~KKC~~Kyowa Kirin Agreement and the timing of our expenditures related to clinical trials. We believe our existing cash and cash equivalents will be sufficient to enable us to fund our operations through ~~the end of 2023.~~mid-2024. However, we anticipate opportunistically raising additional capital before that time through equity offerings, collaboration or license agreements, additional debt financings, or royalty financings in order to maintain adequate capital reserves. In addition, we may choose to raise additional capital at any time for the further development of our existing product candidates and may also need to raise additional funds sooner to pursue other development activities related to additional product candidates.

Decisions about the timing or nature of any financing will be based on, among other things, our perception of our liquidity and of the market opportunity to raise equity, debt, or royalty financing. Additional securities may include common stock, preferred stock, or debt securities. We may explore strategic collaborations or license arrangements for any of our product candidates. If we do explore any arrangements, there can be no assurance that any agreement will be reached, and we may determine to cease exploring a potential transaction for any or all of the assets at any time. If an agreement is reached, there can be no assurance that any such transaction would provide us with a material amount of additional capital resources.

Until we can generate a sufficient amount of revenue from our product candidates, if ever, we expect to finance future cash needs through public or private equity or debt offerings, loans, royalty financings, and collaboration or license transactions. 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. 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, ~~2019and in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, under “Part II, Item 1A. Risk Factors.”~~2020.

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

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

We have various contractual obligations and other commitments that require payments at certain specified periods. The following table summarizes our contractual obligations and commitments as of September 30, ~~2020~~2021 (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		6 years and beyond		Total
	(in thousands)								(unaudited, in thousands)
Operating lease obligations ⁽¹⁾	$	606	$	799	$	—	$	1,405	$	3,002	$	16,605	$	27,563	$	186,757	$	233,927
Payable to collaborators		—		80,000		—		80,000		80,000		—		—		—		80,000
Total contractual obligations	$	606	$	80,799	$	—	$	81,405	$	83,002	$	16,605	$	27,563	$	186,757	$	313,927

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 30, ~~2020,~~2021, 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.~~U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, accrued research and development expenses, income taxes, and stock-based compensation. We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying

values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are described in Note 2 of Part I, Item 1 of this Quarterly Report on Form 10-Q and in Part I, Item 7, “Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form ~~10-K for the year ended December 31, 2019.~~10-K. 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, ~~2019.~~2020.

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, Summary of Significant Accounting Policies, of Notes to Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.

We are exposed to market risks in the ordinary course of our business. These market risks are principally limited to interest rate fluctuations. We had cash and cash equivalents of ~~$578.3~~$713.2 million at September 30, ~~2020,~~2021, 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 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 30, ~~2020.~~2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and

procedures as of September 30, ~~2020,~~2021, 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 15d-15(f) promulgated under the Exchange Act, during the ~~three~~nine months ended September 30, ~~2020,~~2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

For a discussion of material pending legal proceedings, please read Note ~~10,~~11, Commitments and Contingencies – Litigation, to our condensed consolidated financial statements included in Part I, Item I, “Financial Statements (Unaudited),” of this Quarterly Report on Form 10-Q, which is incorporated into this item by reference.

In addition to other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors and other cautionary statements described under the heading “Risk Factors” included in our Annual Report on Form 10-K for the year ended December ~~31, 2019, and our Quarterly Report on Form 10-Q for the quarter ended 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, ~~2019 and the Quarterly Report on Form 10-Q for the quarter ended March 31,~~ 2020.

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)

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		Page
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		1
DEFINED TERMS		3
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	4
	Consolidated Balance Sheets	4
	Consolidated Statements of Operations	5
	Consolidated Statements of Stockholders’ Equity (Deficit)	6
	Consolidated Statements of Cash Flows	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3536
Item 4.	Controls and Procedures	36
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	3637
Item 1A.	Risk Factors	3637
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3637
Item 3.	Defaults Upon Senior Securities	3637
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	38
Signatures		39

	Liability Related to Sale of Future Royalties
	(in thousands)
Transaction date balance	$	294,454
Non-cash interest expense recognized, net of transaction cost amortization		11,077
Balance at September 30, 2020		305,531
Less: Unamortized transaction cost		(868	)
Carrying value at September 30, 2020	$	304,663

	Liability Related to Sale of Future Royalties
	(in thousands)
Balance at December 31, 2020	$	316,305
Non-cash interest expense recognized		34,263
Balance at September 30, 2021		350,568
Less: Unamortized transaction cost		(802	)
Carrying value at September 30, 2021	$	349,766

		As of September 30,
	Balance Sheet Classification	2021			2020
		(in thousands, except for years and percentage data)
Non-current right-of-use assets	Other assets	$	3,068		$	1,167
Current lease liabilities	Other current liabilities	$	3,160		$	564
Non-current lease liabilities	Other long-term liabilities	$	57		$	705

Weighted-average remaining lease term (in years)			1.0			2.1
Weighted-average discount rate			8.1	%		9.6	%

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

	Nine Months Ended September 30, 2019
	Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital		Deficit			Equity (Deficit)
Balance at December 31, 2018		24,000,683	$	24		5,728,175		$	6	$	435,452	$	(420,323	)	$	15,159
Net loss		—		—		—			—		—		(103,228	)		(103,228	)
Compensation expense related to stock options		—		—		—			—		14,090		—			14,090
Exercise of options		—		—		395,641			—		6,448		—			6,448
Conversion of common stock Class B to Class A		525,085		1		(525,085	)		—		—		—			1
Other shareholder transactions		—		—		—			—		107		—			107
Balance at September 30, 2019		24,525,768	$	25		5,598,731		$	6	$	456,097	$	(523,551	)	$	(67,423	)

	As of September 30, 2021
	(in thousands)
2021 (remaining three months)	$	795
2022		2,570
Total lease payments		3,365
Less: Imputed interest		(148	)
Present value of lease liabilities	$	3,217

	Balance Sheet Classification	As of September 30, 2020
		(in thousands)
Non-current right-of-use assets	Other assets	$	1,167
Current lease liabilities	Other current liabilities		564
Non-current lease liabilities	Other long-term liabilities		705

	As of September 30, 2020
	(in thousands)
2020 (remaining three months)	$	164
2021		667
2022		574
Total lease payments		1,405
Less: Imputed interest		(136	)
Present value of lease liabilities	$	1,269


Mean ± SD eGFR Change (mL/min/1.73 m²)	Week 12	Week 24	Week 48
Placebo to Bardoxolone (n=46)	n=28 12.4 ± 11.9	n=14 9.3 ± 14.7	n=8 8.4 ± 11.5
Bardoxolone to Bardoxolone (n=50)	n=39 8.8 ± 15.3	n=30 9.9 ± 14.0	n=19 7.3 ± 8.8

Hierarchy	Analysis Population	Pre-treatment Mean (SE)	Treatment Mean (SE)	Paired Difference Mean (SE)	p-value
1	Primary Population (n=34)	2.28 (0.49)	-1.47 (0.96)	-3.76 (1.13)	0.0022
2	Part 2 Placebo (n=14)	2.84 (1.05)	-1.79 (1.56)	-4.62 (1.89)	0.029
3	Part 1 (n=20)	1.90 (0.40)	-1.26 (1.25)	-3.15 (1.43)	0.040

Exhibit Number		Description

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

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

10.1*+#		Amendment No. 2 to the Exclusive Patent License Agreement among the Board of Regents of The University of Texas System, The University of Texas M.D. Anderson Cancer Center, and the Trustees of Dartmouth College and the Registrant, dated as of August 17, 2021 as amended.

10.2*+#		Amendment No. 2 to the Exclusive License Agreement between the Trustees of Dartmouth College and the Registrant, dated as of August 17, 2021 as amended.

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 ~~9, 2020~~8, 2021	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