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 ~~August 3, 2021,~~May 4, 2022, the registrant had ~~31,464,327~~31,543,735 shares of Class A common stock, $0.001 par value per share, and ~~4,923,075~~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.

1. Description of Business

~~The Company’s~~Reata Pharmaceuticals, Inc.’s (Reata, the Company, we, us, or our) mission is to identify, develop, and commercialize innovative therapies that change patients’ lives for the better. The Company focuses on small-molecule therapeutics with novel mechanisms of action for the treatment of severe, life-threatening diseases with few or no approved therapies. The Company’s lead programs are omaveloxolone in a rare neurological disease called Friedreich’s ataxia (FA) and bardoxolone methyl (bardoxolone) in rare forms of chronic kidney disease (CKD) ~~and a rare neurological disease. The Company announced positive topline data from registrational trials for both~~. Both of ~~its~~the Company’s lead product candidates bardoxolone methyl (bardoxolone) in patients with CKD caused by Alport syndrome and 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, the Company believes omaveloxolone, bardoxolone, ~~omaveloxolone,~~ and our next-generation Nrf2 activators have many potential clinical applications. Reata possesses exclusive, worldwide rights to develop, manufacture, and commercialize omaveloxolone, 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). In addition, we are developing RTA 901, the lead product candidate from our Hsp90 modulator program, in neurological indications. We are the exclusive licensee of RTA 901 and have worldwide commercial rights.

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

Prior period reclassifications

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

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2021.~~2022. The consolidated balance sheet at December 31, ~~2020,~~2021, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the annual consolidated financial statements and footnotes thereto of the Company.

Summary of Significant Accounting Policies

The significant accounting policies used in the preparation of these condensed consolidated financial statements for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 are consistent with those discussed in Note 2 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

~~Recently Adopted Accounting Pronouncements~~

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. The FASB issued this 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. The Company adopted this

~~standard on~~

~~January 1, 2021,~~8

~~and its adoption did not have material impact to the Company’s consolidated financial statements and related disclosure.~~

3. Collaboration Agreements

~~Beginning in 2020,~~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 ~~KKC~~Kyowa Kirin (the ~~KKC~~Kyowa Kirin Agreement).

~~KKC~~Kyowa Kirin

In December 2009, the Company entered into an exclusive license with ~~KKC~~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~~$35.0 million and additional development and commercial milestone payments. As of ~~June 30, 2021,~~March 31, 2022, the Company has received ~~$45.0~~$50.0 million related to regulatory development milestone payments from ~~KKC~~Kyowa Kirin and has the potential in the future to achieve another ~~$52.0~~$47.0 million from regulatory milestones and ~~$140.0~~$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 ~~KKC~~Kyowa Kirin in the licensed territory. The Company is participating on a joint steering committee with ~~KKC~~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 ~~KKC~~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 ~~KKC~~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 ~~KKC~~Kyowa Kirin Agreement.

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

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

AbbVie

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

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

The Company recognized interest expense related to the Reacquisition Agreement of approximately ~~$1.8 million and $1.6~~$1.7 million, during the three months ended ~~June 30, 2021 and 2020, respectively, and $3.5 million and $3.2 million during the six months ended June 30, 2021 and 2020, respectively.~~March 31, 2021. As of ~~June 30, 2021,~~ March 31, 2022, the ~~Company’s~~Company has fully satisfied its payable to ~~collaborators was $80.0 million, with a present value of $76.9 million~~AbbVie, therefore . 0

~~4. Term Loan~~

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 which it borrowed $155.0 million as of December 20, 2019. On June 24, 2020, the Company paid off the total outstanding balance of the 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. The Company recognized approximately $4.3 million and $8.3 million in interest expense, during the three months and six months ended June 30, 2020, respectively. NaN interest expense was recognized ~~in 2021 as~~for the ~~term loan was paid off in June 2020.~~three months ended March 31, 2022.

5.4. Liability Related to Sale of Future Royalties

On June 24, 2020, the Company closed on the Development and Commercialization Funding Agreement with an affiliate of Blackstone Life Sciences, LLC (BXLS), which provides funding for the development and commercialization of bardoxolone for the treatment of CKD caused by Alport syndrome, autosomal dominant polycystic kidney disease (ADPKD), and certain other rare CKD indications in return for future royalties (the Development Agreement). The Development Agreement includes a ~~$300.0~~$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.After a bardoxolone product approval has been obtained by the Company, the Company is obligated to make certain minimum cumulative payment amounts in 2025 through 2033, but only until BXLS has achieved certain internal rate of return target.

In addition, concurrent with the Development Agreement, the Company entered into a common stock purchase agreement (the Purchase Agreement) with affiliates of BXLS to sell an aggregate of 340,793 shares of the Company’s Class A common stock at ~~$146.72~~$146.72 per share for a total of ~~$50.0~~$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~~$300.0 million from the Development Agreement and ~~$50.0~~$50.0 million from the Purchase Agreement between the two units of accounting on a relative fair value basis at the time of the transaction. The Company allocated ~~$294.5~~$294.5 million, which includes ~~$0.8~~$0.8 million in transaction costs incurred, in transaction consideration to the liability, and ~~$55.5~~$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%~~13.8%. The Company reassessed the expected royalty payments and lowered our previous estimate of future sales for which royalties will be paid. Accordingly, we have prospectively adjusted and recognized lower non-cash interest expense using a 10.9% effective interest rate, as of March 31, 2022.

The following table shows the activity within the liability related to sale of future royalties for the ~~six~~three months ended ~~June 30, 2021:~~March 31, 2022:


	Liability Related to Sale of Future Royalties
	(in thousands)
Balance at December 31, 2021	$	362,928
Non-cash interest expense recognized		9,855
Balance at March 31, 2022		372,783
Less: Unamortized transaction cost		(770	)
Carrying value at March 31, 2022	$	372,013

Liability Related to Sale of Future Royalties

(in thousands)

Balance at December 31, 2020
$
316,305

Non-cash interest expense recognized

22,322

Balance at June 30, 2021

338,627

Less: Unamortized transaction cost

(819
)
Carrying value at June 30, 2021
$
337,808

6.5. Other Income (Expense), Net


													Three Months Ended
	Three Months Ended						Six Months Ended						March 31
	June 30						June 30						2022			2021
	2021			2020			2021			2020			(in thousands)
Other income (expense), net
Investment income	$	13		$	501		$	93		$	2,555		$	132		$	80
Interest expense		(1,773	)		(5,644	)		(3,487	)		(11,512	)		0			(1,714	)
Non-cash interest expense on liability related to sale of future royalty		(11,429	)		(664	)		(22,354	)		(664	)		(9,871	)		(10,925	)
Other income (expense)		(34	)		0			(32	)		0			(33	)		3
Loss on extinguishment of debt		0			(11,183	)		0			(11,183	)
Total other income (expense), net	$	(13,223	)	$	(16,990	)	$	(25,780	)	$	(20,804	)	$	(9,772	)	$	(12,556	)

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

Interest expense consists primarily of the imputed interest from amount due to AbbVie under the Reacquisition ~~Agreement and interest on its Term Loans in 2020.~~Agreement.

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

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

6. Leases

~~Loss on Extinguishment of Debt~~

~~In June 2020, the~~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.~~

~~7. Leases~~

~~The Company’s~~ headquarters ~~are~~is located in Plano, Texas, where it leases approximately 122,000 square feet of office ~~space, with lease terms extending through June 30, 2022 and an option to renew up to three months.~~space. The Company leases additional space located in Irving, Texas, where it leases approximately 34,890 square feet of office and laboratory space.

On February 4, 2022, the Company extended the lease for the office and laboratory space ~~of approximately 34,890 square feet located~~ in Irving, Texas, to October 31, 2024, with ~~lease terms extending through April 30, 2022 and~~ an option to ~~renew up to four successive~~ extend~~three-month~~ for a fixed ~~periods.~~ twelve-month period.

~~The~~On March 8, 2022, the Company ~~has elected to net the amortization of the right-of-use assets and the reduction of~~extended 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 six months ended June 30, 2021, cash paid for amounts included for the measurement of lease liabilities was $0.8 million and $1.6 million, respectively. During the three and six months ended June 30, 2021, the Company recorded operating lease expense of $0.8 million and $1.6 million, respectively.

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

As of June 30,

Balance Sheet Classification

2021

2020

(in thousands, except for years and %)

Non-current right-of-use assets

Other assets

$
3,796

$
7,653

Current lease liabilities

Other current liabilities

$
2,970

$
3,452

Non-current lease liabilities

Other long-term liabilities

$
962

$
5,212

Weighted-average remaining lease term (in years)

1.3

2.3

Weighted-average discount rate

8.1
%

9.6
%

December 31, 2023.

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

As of June 30, 2021

(in thousands)

2021 (remaining six months)

$
1,585

2022

2,570

Total lease payments

4,155

Less: Imputed interest

(223
)
Present value of lease liabilities

$
3,932

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~~period. On December 15, 2021, the Company ~~does not have~~obtained control of the space, orand, accordingly, the ~~construction prior to completion of construction. Therefore, 0~~Company recorded related right-of-use orassets and the lease liabilities ~~were~~during the fourth quarter of 2021. The Company recorded ~~in connection~~the liability associated with the 2019 Lease Agreement at the present value of the lease payments not yet paid, using the discount rate as of ~~June 30, 2021. Under~~ the ~~First Amendment to~~commencement date. As the discount rate implicit in the 2019 Lease Agreement ~~executed~~was not readily determinable, the Company utilized its incremental borrowing rate. The renewals are not assumed in ~~May 2020,~~ the ~~landlord will fund~~determination of the ~~Company’s leasehold improvements up~~lease term, since they are not deemed to ~~$31.3~~be reasonably assured at the inception of the lease. At inception, the Company recorded $124.5 million as a right-of-use asset, which represented a lease liability of $133.2 million, net of $8.7 million of ~~which~~lease incentives recognized.

For the three months ended March 31, 2022, the Company ~~has recorded a leasehold incentive obligation of approximately $3.3~~paid $0.8 million as other long-term liabilities as of June 30, 2021. The initial annual base rent will be determined based on the project cost, subject to an initial annual cap of approximately $13.3 million, which may increase in certain circumstances. Beginningfor amounts included in the ~~third~~measurement of lease year, the base rent will increase 1.95% per annum each year. In addition to the annual base rent, the Company will pay for taxes, insurance, utilities, operating expenses, assessments under private covenants, maintenance and repairs, certain capital repairs and replacements, and building management fees.

~~8. Income Taxes~~

On March 27, 2020, the United States enacted the CARES 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, in March 2020, the Company recognized tax benefits and receivables totaling $22.2 million associated with the ability to carryback an applicable prior year’s net operating losses to a preceding year, which had previously been fully reserved by its valuation allowance.liabilities. During the ~~second quarter of~~three months ended March 31, 2022, and 2021, the Company ~~received a~~recorded total rent expense of ~~$22.9~~$4.3 million ~~from~~and $0.8million, respectively.

Supplemental balance sheet and other information related to the ~~IRS, $22.2 million~~Company’s operating leases is as follows:


	As of March 31,
	2022			2021
Weighted-average remaining lease term (in years)		15.6			1.5
Weighted-average discount rate		6.5	%		8.1	%

Maturities of lease liabilities by fiscal year for the ~~income tax receivable plus $0.7 million~~Company’s operating leases:


	As of March 31, 2022
	(in thousands)
2022 (remaining nine months)	$	9,748
2023 (1)		10,638
2024		7,427
2025		13,737
Thereafter		196,049
Total lease payments (1)		237,599
Less: Imputed interest		(96,012	)
Present value of lease liabilities	$	141,587

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

7. Income Taxes

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

	Three Months Ended						Six Months Ended
	June 30						June 30						Three Months Ended
	2021			2020			2021			2020			March 31
Income tax (benefit) expense	$	653		$	3		$	669		$	22,243
													2022			2021
													(in thousands, except for percentage data)
Benefit from (provision for) taxes on income													$	(31	)	$	15
Effective income tax rate		0.9	%		0	%		0.5	%		16	%		0.0	%		0.0	%

The Company’s effective tax rate for the three months ~~and six months~~ ended ~~June 30, 2021,~~March 31, 2022, varies with the statutory rate primarily due to changes in the valuation allowance related to certain deferred tax assets generated or utilized in the applicable period.

Deferred tax assets are regularly reviewed for recoverability by jurisdiction and valuation allowances are established based on historical and projected future taxable losses and the expected timing of the reversals of existing temporary differences. The Company has recorded valuation allowances against the majority of its deferred tax assets as of ~~June 30, 2021,~~March 31, 2022, and the Company expects to maintain these valuation allowances until there is sufficient evidence that future earnings can be achieved, which is uncertain at this time.

9.12

8. Stock-Based Compensation

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


									Three Months Ended
	Three Months Ended				Six Months Ended				March 31
	June 30				June 30				2022		2021
	2021		2020		2021		2020		(in thousands)
Research and development	$	5,263	$	7,527	$	12,071	$	19,044	$	7,606	$	6,808
General and administrative		7,981		7,269		15,852		15,060		7,838		7,871
Total stock compensation expense	$	13,244	$	14,796	$	27,923	$	34,104	$	15,444	$	14,679

Restricted Stock Units (RSUs)

The following table summarizes RSU activity as of ~~June 30, 2021,~~March 31, 2022, under the Second Amended and Restated Long Term Incentive Plan (LTIP Plan) agreement:

	Number of RSUs			Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2021		108,551		$	115.54
						Number of RSUs			Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2022							809,145		$	66.91
Granted		277,300			121.02		513,559			27.36
Vested		(5,482	)		184.18		(37,942	)		110.88
Forfeited		(26,041	)		129.87		(67,917	)		71.76
Outstanding at June 30, 2021		354,328		$	117.69
Outstanding at March 31, 2022							1,216,845		$	48.58

As of ~~June 30, 2021,~~March 31, 2022, total unrecognized compensation expense related to RSU and performance-based RSUs awards that were deemed probable of vesting was approximately ~~$8.6~~$40.8 million, which excludes ~~282,992~~148,000 shares of unvested performance-based RSUs that were deemed not probable of vesting totaling unrecognized stock-based compensation expense of ~~$32.0~~$14.2 million.

Stock Options

The following table summarizes stock option activity as of ~~June 30, 2021,~~March 31, 2022, under the LTIP Plan and standalone option agreements:

	Number of Options			Weighted- Average Price
Outstanding at January 1, 2021		4,306,269		$	79.47
						Number of Options			Weighted- Average Price
Outstanding at January 1, 2022							4,743,180		$	86.06
Granted		828,524			123.74		1,110,981			27.78
Exercised		(219,241	)		38.34		(9,375	)		21.25
Forfeited		(192,203	)		125.36		(175,492	)		114.33
Expired		(37,729	)		202.89		(7,468	)		145.19
Outstanding at June 30, 2021		4,685,620		$	86.32
Exercisable at June 30, 2021		2,409,185		$	50.60
Outstanding at March 31, 2022							5,661,826		$	73.78
Exercisable at March 31, 2022							3,013,168		$	59.05

Stock-based compensation expense for the three and six months ended June 30, 2021, included accelerated recognition of expense of $1.4 million, due to modifications of outstanding stock options as a result of an employee who entered into a consulting agreement at the termination of employment, which was considered to be non-substantive services.

As of ~~June 30, 2021,~~March 31, 2022, total unrecognized compensation expense related to stock options was approximately ~~$116.0~~$88.4 million, which excludes ~~481,550~~568,450 shares of unvested performance-based stock options that were deemed not probable of vesting totaling unrecognized stock-based compensation expense of ~~$48.7~~$49.4 million.

The total intrinsic value of all outstanding options and exercisable options ~~at June 30, 2021~~as of March 31, 2022 was ~~$313.4~~$24.5 million and ~~$232.2~~$18.9 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 ~~4,685,620~~6,878,671 and ~~4,793,680~~4,766,386 shares as of ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

~~10.~~ 9. Employee Benefit Plans

In 2010, we adopted an Employee Investment Plan, qualified under Section 401(k) of the Internal Revenue Code, which is a retirement savings plan covering substantially all of our U.S. employees (the Plan). The Plan is administered under the “safe harbor” provision of ERISA. Under the Plan, an eligible employee may elect to contribute a percentage of their salary on a pre-tax basis, subject to federal statutory limitations. Beginning in January 2019, the Company implemented a discretionary employer matching contribution of ~~$1.00~~$1.00 for every ~~$1.00~~$1.00 contributed by a participating employee up to ~~$6,000~~$7,000 and ~~$5,000~~$6,000 annually in ~~2021~~2022 and ~~2020,~~2021, respectively, which such matching contributions become fully vested after four years of service. The Company recorded expense of ~~$0.4~~$1.3 million and ~~$0.3~~$0.8 million for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and $1.2 million and $0.9 million for the six months ended June 30, 2021 and 2020,~~ respectively, which includes the Company’s contributions and administrative costs.

~~11.~~ 10. Commitments and Contingencies

Litigation

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

~~Patel~~Bardoxolone Securities Litigation

~~On October 15, 2020, Toshif Patel~~Four putative stockholders of the Company filed ~~a complaint~~complaints for alleged ~~violation~~violations of the federal securities laws against the Company and certain of its executives, including its Chief Executive Officer, its Chief Operating Officer and Chief Financial Officer, and its Chief ~~Financial~~Innovation Officer (in one of the suits), three of the complaints were filed in the United States District Court for the Eastern District of ~~Texas.~~Texas, and one was filed in the District of New Jersey. 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,complaints allege, among other things, that the ~~defendants~~Company (and certain of its executives) made false and misleading statements regarding the sufficiency of ~~its MOXIe Part 2~~the Phase 3 CARDINAL study ~~results~~ to support ~~a single study marketing approval of omaveloxolone~~an NDA for bardoxolone in the treatment of FACKD caused by Alport syndrome, and the Company’s interactions with the FDA concerning the study. The complaints filed in the United ~~States.~~States District Court for the Eastern District of Texas, were consolidated on April 22, 2022, and the complaint filed in the District of New Jersey on February 18, 2022, which subsequently was voluntarily dismissed. The plaintiffs seek, among other things, a class action designation, an award of damages, and costs and expenses, including attorney fees and expert fees. The Company currently expects a single, consolidated, amended complaint to be filed in the future.

The Company believes that the allegations contained in the complaints are without merit and intends to defend the cases. The Company cannot predict at this point the length of time that these actions will be ongoing or the liability, if any, which may arise therefrom.

Derivative Lawsuit

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

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

Indemnifications

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

As permitted under Delaware law and in accordance with the Company’s bylaws, officers and directors are indemnified for certain events or occurrences, subject to certain limits, while the officer or director is or was serving in such capacity. The maximum amount of potential future indemnification is unlimited; however, the Company has obtained director and officer insurance that limits its exposure and may enable recoverability of a portion of any future amounts paid. The Company believes the fair value for these indemnification obligations is minimal. Accordingly, the Company has not recognized any liabilities relating to these obligations as of ~~June 30, 2021.~~ March 31, 2022.

The Company has certain agreements with licensors, licensees, collaborators, and ~~collaborators~~vendors that contain indemnification provisions. In such provisions, the Company typically agrees to indemnify the licensor, licensee, collaborator, or ~~collaborator~~vendor against certain types of third-party claims. The Company accrues for known indemnification issues when a loss is probable and can be reasonably estimated. There were 0 accruals for expenses related to indemnification issues for any period presented.

11. Subsequent Events

~~12. Subsequent Events~~

~~In July 2021, KKC announced~~On May 6, 2022, an alleged stockholder of the ~~submission of~~Company filed a ~~New Drug Application (NDA) in Japan for bardoxolone in patients with CKD caused by Alport syndrome. The Company earned a $5.0 million milestone related to this event that will be recognized~~derivative action in the ~~third quarter~~Court of ~~2021.~~Chancery of the State of Delaware against all of the directors of the Company and naming the Company as a nominal defendant. See Note 10, Commitments and Contingencies of Notes to Unaudited Consolidated Financial Statements for a description of the litigation.

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

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

Overview

We are a clinical-stage biopharmaceutical company focused on identifying, developing, and commercializing innovative therapies that change patients’ lives for the better. We concentrate on small-molecule therapeutics with novel mechanisms of action for the treatment of severe, life-threatening diseases with few or no approved therapies. Our lead programs are omaveloxolone in FA and bardoxolone in rare forms of ~~CKD and a rare neurological disease. We announced positive topline data from registrational trials for both~~CKD. Both of our lead product candidates ~~bardoxolone in patients with CKD caused by Alport syndrome and 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 omaveloxolone, bardoxolone, and ~~omaveloxolone~~our next-generation Nrf2 activators have many potential clinical applications. We possess exclusive, worldwide rights to develop, manufacture, and commercialize omaveloxolone, bardoxolone, ~~omaveloxolone,~~ and our next-generation Nrf2 activators, excluding certain Asian markets for bardoxolone in certain indications, which are licensed to ~~KKC.~~Kyowa Kirin. In addition, we are developing RTA 901, the lead product candidate from our Hsp90 modulator program, in neurological indications. We are the exclusive licensee of RTA 901 and have worldwide commercial rights.

Recent Key Developments

~~Bardoxolone in Patients with CKD Caused by Alport Syndrome~~Omaveloxolone for Friedreich’s Ataxia

~~On April 26, 2021,~~The FDA has granted Fast Track Designation, Orphan Drug Designation, and Rare Pediatric Disease Designation to omaveloxolone for the treatment of FA. In March 2022, we ~~announced that~~completed rolling submission of an NDA to the ~~U.S. Food and Drug Administration (FDA) accepted~~FDA for ~~filing the NDA for bardoxolone~~omaveloxolone for the treatment of patients with ~~CKD caused by Alport syndrome, and the~~FA. This NDA is ~~currently under review~~supported by the ~~FDA. The FDA completed~~efficacy and safety data from the MOXIe Part 2 trial and additional supporting data from the MOXIe Part 1 and MOXIe Extension trials.

We are continuing to complete the regulatory procedures and submissions required prior to filing a ~~bio-research monitoring inspection~~Marketing Authorization Application (MAA) in Europe for approval of ~~Reata.~~omaveloxolone for the treatment of patients with FA. We ~~did not receive any observations. We also recently completed a mid-cycle communication meeting~~have secured agreement on our Pediatric Investigation Plan with the ~~FDA. While~~Pediatric Committee, and we ~~have not yet~~also received ~~formal minutes from the FDA, in the preliminary agenda for,~~European Medicines Agency (EMA) Follow-Up Protocol Assistance feedback regarding our nonclinical and ~~during, the meeting, the FDA~~chemistry manufacturing controls (CMC) programs. The EMA feedback indicated that there were no identified ~~four significant clinical~~impediments to our planned MAA submission and ~~statistical review issues. We believe each of these issues are addressable with additional~~included agreement that certain nonclinical studies, including 2- year carcinogenicity study data, ~~and analyses, and the FDA invited us to address its identified issues in follow-up submissions to the NDA.~~may be submitted after approval. We plan to ~~address each of the issues through the submission of additional data and analyses~~submit an MAA to the ~~NDA. See~~ ~~Programs~~European Medicines Agency for omaveloxolone in ~~Chronic Kidney Disease~~the fourth quarter of 2022. –

RTA 901 for Neurological Indications, Including Diabetic Peripheral Neuropathic Pain

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

Bardoxolone in Patients withCKD Caused by Alport Syndrome ~~below.~~

~~The FDA made additional information requests and identified~~We received a few additional issues that were not deemed significant. The FDA did not designate any safety issues as significant issues, and it stated that, based on its current review, it does not believe a Risk Evaluation and Mitigation Strategies (REMS) program is needed. We were notified that we would be receiving comments in writing regarding Chemistry, Manufacturing, and Controls (CMC), and we will not be receiving any nonclinical comments. The FDA also advised us that an Advisory Committee meeting is tentatively scheduled for December 8, 2021. The Prescription Drug User Fee Act (PDUFA) date,Complete Response Letter (CRL) from the FDA ~~action date for the application, is scheduled for~~in February ~~25, 2022.~~

~~We also plan~~2022 with respect to ~~pursue marketing approval outside~~its review of the United States. We plan to submit a Marketing Authorization Application (MAA) with the European Medicines Agency (EMA) in the fourth quarter of 2021 for marketing approval of bardoxolone for the treatment of CKD caused by Alport syndrome in the European Union.

~~On July 27, 2021, KKC,~~ our ~~strategic collaborator in CKD in Japan, submitted an~~ NDA ~~in Japan to the Ministry of Health, Labour and Welfare (MHLW)~~ for bardoxolone ~~for~~in the treatment of patients with CKD caused by Alport syndrome. ~~Based~~The CRL indicated the FDA cannot approve the NDA in its present form. We will continue to work with the FDA to confirm our next steps on ~~this submission,~~our Alport syndrome program.

In October 2021, we ~~have earned a $5 million milestone payment under~~submitted an MAA to the ~~KKC Agreement. If approved~~EMA for ~~commercial sales, KKC is required to pay us royalties on net sales of~~ bardoxolone in ~~its territory ranging~~the treatment of patients with CKD caused by Alport syndrome. In the first quarter of 2022, we received the 120-day list of questions from the ~~low teens to~~EMA. We are in the ~~low 20% range depending on~~process of preparing our responses. We requested a 90-day extension for our responses which was granted by the ~~country of sale and~~EMA. The timeline for the ~~amount of annual net sales.~~EMA’s review cycle was therefore extended.

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

We are currently enrolling patients in FALCON, ana Phase 3, 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 placebo. ~~The protocol currently specifies that the study will enroll approximately 550~~FALCON is enrolling patients in a broad range of ages ~~18 to 70 years old,~~ with an estimated glomerular filtration rate (eGFR) between 30 toand 90 mL/min/1.73 m2. The current primary endpoint is the off-treatment eGFR change from baseline versus placebo at Week 52, which represents 48 weeks of treatment followed by a four-week withdrawal period. At 52 weeks, patients resume treatment for a second 48-week period to Week 100 followed by a second four-week withdrawal period to Week 104. The key secondary endpoint is the off-treatment eGFR change from baseline versus placebo at Week 104.

We recently had a Type B meeting with the FDA regarding the ADPKD development program. We have not yet received minutes from the meeting, however, based on the discussion in the meeting, we are considering amendments to the FALCON protocol. We currently plan to modify the protocol so that the primary endpoint will be the Year 2 off-treatment analysis, and we will not unblind the trial until completion of Year 2. In addition, we will add an eight-week off-treatment visit to the study, and we will incorporate the FDA’s feedback on data related to patients who discontinued treatment early in the study. We may need to increase the patient sample size from the current target ofMorethan 550 ~~patients. More than 370~~ patients are currently enrolled in the ~~study. We continue~~trial.

In the first quarter of 2022, we submitted a protocol amendment to ~~expect to enroll 550 patients in~~ the FALCON ~~study by the end of 2021. However, if we decide to increase the target enrollment, we will provide updated guidance on our enrollment timeline. See~~ ~~Programs in Chronic Kidney Disease – Bardoxolone in Patients with ADPKD~~ ~~below.~~

~~Bardoxolone in Patients with CKD at Risk of Rapid Progression~~

~~MERLIN is a multi-center, double-blind, placebo-controlled,~~ Phase 23 trial ~~to evaluate the safety and efficacy~~ of bardoxolone in patients ~~at risk~~with ADPKD with the FDA and other relevant health authorities. As agreedwith the FDA prior to submission of ~~rapidly progressing CKD due~~the amendment, we recently had a Type A meeting 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,~~discuss key changes made to the FALCON protocol. Based on the discussion during the meeting and ~~others. The~~the meeting minutes, the Division stated that the proposed primary endpoint of ~~the trial is~~eGFR change ~~in eGFR~~ from baseline toat Week ~~12. We~~108 (8 weeks after planned drug discontinuation at Week 100) was reasonable since the available data suggest that bardoxolone’s acute pharmacodynamic effect on eGFR should be largely resolved. The Division provided guidance on handling of data from patients who completed Year 2 of the study before the protocol amendment and so did not have ~~completed enrollment~~an eGFR assessment at Week 108. This included direction on imputing missing data for these patients in the ~~MERLIN trial and expect to have top-line data~~primary analysis. The Division stated that, in the fourth quarter of 2021. 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 end-stage kidney disease (ESKD) and are a population with high unmet need across multiple forms of CKD.

~~Omaveloxolone in Patients with Friedreich’s Ataxia~~

~~During the first quarter of 2021, we submitted results from the Delayed-Start Analyses~~addition to the ~~FDA. These additional exploratory analyses analyzed data from~~primary endpoint, it will be important to demonstrate that the ~~registrational Part 2 portion~~treatment effect accrues over time to support a claim that bardoxolone slows the loss of ~~the MOXIe Phase 2 trial of omaveloxolone~~kidney function in patients with ~~FA (MOXIe Part 2)~~ADPKD and provided guidance on the open-label extension study (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 the double-blind period from MOXIe Part 2, through 48 weeks in the MOXIe Extension could provide evidence of disease-modifying activity. A total of 73 out of 75 (97%) patients without ~~pes cavus~~ who completed MOXIe Part 2 enrolled in the MOXIe Extension. A longitudinal analysis used to calculate annualized slopes incorporating all available data from the MOXIe Extension showed similar slopes in Modified Friedreich’s Ataxia Rating Scale (mFARS)statistical methodologies for the placebo-to-omaveloxolone group (0.59 points per year) when compared to the omaveloxolone-to-omaveloxolone group (0.41 points per year) with no significant difference between slopes (p=0.75). The resulting parallel trajectories

~~between both treatment groups are consistent with disease-modifying activity. We requested and were granted a Type C meeting to discuss whether the data would support an NDA submission.~~

On May 19, 2021, we received a communication from the FDA suggesting that, after a preliminary review of briefing materials for the Type C meeting, including the Delayed-Start Analyses, a pre-NDA meeting is the most appropriate format for a discussion of the development program for omaveloxolone in FA.exploratory eGFR slope analyses. The FDA also ~~suggested~~confirmed that ~~we withdraw the current Type C meeting request and instead request a pre-NDA meeting. During the second quarter~~if FALCON is positive, it could support registration of 2021, we withdrew our request for a Type C meeting and requested a pre-NDA meeting with the FDA. The pre-NDA meeting request has been granted, a pre-NDA meeting has been scheduled during the third quarter of this year, and we have submitted briefing materials for the meeting. We recently received a communication from the FDA requesting the estimated date of our NDA for its planning purposes. We plan to submit the NDA during the first quarter of 2022.bardoxolone in ADPKD.

Update on Adjustments to Operations Due to COVID-19

~~We continue~~When COVID-19 emerged as a global pandemic in the first quarter of 2020, Reata was quick to ~~closely monitor~~respond and ~~adhere~~was an early adopter of a work-from-home policy, with the exception of the laboratory that continued to ~~COVID-19 guidance issued by local, state,~~operate throughout under strict safety protocols. For all remote employees, we provided appropriate workstation equipment as well as training and ~~national authorities. Since May~~resources to support employees’ mental and emotional wellbeing. In the second quarter of 2021, ~~we rolled out a voluntary return-to-office program, including flexible work schedules. We plan to have all~~Reata relaxed its policy and permitted employees to return to the office byas required. Although the ~~end of the 3rd quarter of 2021, assuming no significant changes are required~~Omicron variant temporarily caused us to again restrict office attendance, in ~~pandemic management protocols.~~February 2022 we permitted modified work schedules to meet business and personal needs.

Background: Our Programs

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

~~In addition, KKC,~~1Rolling NDA submission completed in March 2022.

2DPNP: Diabetic peripheral neuropathic pain.

3On February 25, 2022, we received a CRL from the FDA. We will continue to work with the FDA to confirm our next steps on our Alport syndrome program. MAA in EU is under review.

4AYAME trial conducted in Japan by our strategic collaborator in CKD, ~~is currently conducting its registrational trial~~Kyowa Kirin. Kyowa Kirin expects the last patient visit in the second half of 2022.

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

Programs in Neurological Diseases

We are developing omaveloxolone for the treatment of patients with FA, an inherited, debilitating, and degenerative neuromuscular disorder that is usually diagnosed during adolescence and can ultimately lead to premature death. In March 2022, we completed rolling submission of our NDA for omaveloxolone for the treatment of patients with FA. Because mitochondrial dysfunction is a key feature of many neuromuscular diseases, we believe omaveloxolone may be broadly applicable to treat neurological diseases by activating Nrf2 to normalize and improve mitochondrial function and adenosine triphosphate (ATP) production. We plan to pursue the development of omaveloxolone and our other Nrf2 activators for one or more additional neurological diseases.

We are also developing RTA 901 for the treatment of neurological diseases. RTA 901 is a highly potent and selective C-terminal modulator of Hsp90, which has a critical role in mitochondrial function, protein folding, and inflammation. RTA 901 has demonstrated profound efficacy in a wide range of animal models of neurological disease, including diabetic ~~(type 1~~neuropathy, neuroinflammation, and ~~2) CKD in Japan. KKC completed patient enrollment in this~~neuropathic pain. We plan to initiate a randomized, placebo-controlled Phase 2 trial in ~~June 2019 and expects to have topline data~~DPNP in the ~~first half~~fourth quarter of 2022.

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

**See discussion below under “OmaveloxoloneOmaveloxolone in Patients with ~~FA”.~~Friedreich’s Ataxia

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

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

MOXIe Part 2 Trial Results

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

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

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

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

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

MOXIe Extension Trial

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

Delayed-Start Analysis Results from August 2021 Data Cut-Off

The intent of the post-hoc Delayed-Start Analysis is to evaluate whether omaveloxolone has a persistent effect on FA disease course. Conceptually, this analysis evaluates whether the treatment effect that was observed in the placebo-controlled MOXIe Part 2 trial is maintained in the MOXIe Extension trial when all patients are receiving omaveloxolone. If the treatment effect is maintained between those originally randomized to placebo (the placebo-to-omaveloxolone group) versus those originally randomized to omaveloxolone (the omaveloxolone-to-omaveloxolone group), then it demonstrates evidence of a persistent effect on the course of the disease. If the treatment effect is not maintained, and the patients originally randomized to placebo are able to achieve the same absolute response and “catch up” to the patients initially randomized to omaveloxolone, the results are consistent with a symptomatic treatment that does not affect the underlying course of the disease.

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

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

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

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


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

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

Change from Baseline in mFARS (Patients without Pes Cavus)

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

A longitudinal analysis was also performed to calculate annualized slopes incorporating all available data from the MOXIe Extension, which showed similar mean slopes in mFARS for the placebo-to-omaveloxolone group (0.45 ± 0.38 points per year) when compared to the omaveloxolone-to-omaveloxolone group (0.27 ± 0.59 points per year) with no significant difference between slopes (difference = -0.18 ± 0.67; p=0.79). In MOXIe Extension, omaveloxolone-treated patients have been progressing at a rate that is >75% less than the approximately two points per year that patients progressed in a recent large natural history study (Patel, 2016).

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

No new safety signals have been identified in the MOXIe Extension trial.

Regulatory Interactions

In the third quarter of 2021, we completed our pre-NDA meeting with the FDA. The purpose of the pre-NDA meeting was to discuss the content of Reata’s planned NDA submission including the nonclinical data and CMC packages, data standard plan, and the overall content plan. In the meeting, we stated that we believed that the MOXIe data, along with the Delayed-Start Analysis, would provide sufficient clinical data to support a full approval. The FDA stated that the proposed primary and supportive efficacy data appear reasonable, though the Delayed-Start Analysis was viewed as exploratory. The FDA noted that the ability of the data to support full approval, and the adequacy of the data and the determination of which data may be supportive of efficacy, would be a matter of review. In response to our other questions about the contents of the NDA, the FDA exercised its discretion based on the seriousness of the indication and unmet medical need, subject to review, to permit us to submit the results of certain clinical pharmacology and nonclinical studies after approval. The additional studies include a thorough QT study with omaveloxolone, nonclinical metabolite toxicity studies, and six-month and two-year nonclinical carcinogenicity studies. The need for a drug-drug interaction study with a moderate CYP3A inducer will be established upon review of the adequacy of our submitted physiological based pharmacokinetic (PK) model.

On November 18, 2021, the FDA granted omaveloxolone Fast Track Designation for the treatment of FA, providing eligibility for FDA programs such as Priority Review and rolling submission of the NDA, if relevant criteria are met. The FDA granted our request for a rolling submission, and in March 2022, we completed submission of the NDA. This NDA is supported by the efficacy and safety data from the MOXIe Part 2 trial and additional supporting data from the MOXIe Part 1 and MOXIe Extension trials.

We are continuing to complete the regulatory procedures and submissions required prior to filing a MAA in Europe for approval of omaveloxolone for the treatment of patients with FA. We have secured agreement on our Pediatric Investigation Plan with the Pediatric Committee, and we also received EMA Follow-Up Protocol Assistance feedback regarding our nonclinical and CMC programs. The EMA feedback indicated that there were no identified impediments to our planned MAA submission and included agreement that certain nonclinical studies, including 2- year carcinogenicity study data, may be submitted after approval. We plan to submit an MAA to the European Medicines Agency for omaveloxolone in the fourth quarter of 2022.

Omaveloxolone in Other Neurological Indications

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

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

Our Nrf2 activators reduced seizure frequency in refractory, progressive epilepsy models and restored mitochondrial function in patient biopsy samples and preclinical models of FA, ALS, familial and sporadic Parkinson’s disease, and 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.

RTA 901 in Neurological Diseases

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

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

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

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

Programs in Chronic Kidney Disease

We and Kyowa Kirin, our strategic collaborator in CKD in Japan, are developing bardoxolone for the treatment of ~~patients with~~CKD in multiple indications, including CKD caused by Alport syndrome, ADPKD, and ~~certain other forms of CKD that, in the aggregate, affect more than 700,000 patients in the United States.~~type 1 and 2 diabetic CKD. 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. When GFR drops below approximately 15 mL/min/1.73 m~~²~~, patients~~

~~develop ESKD and require dialysis or a kidney transplant to survive. Dialysis leads to a reduced quality of life and increases~~blood, called the ~~likelihood of serious and life-threatening complications. The five-year survival~~glomerular filtration rate ~~for hemodialysis patients is approximately 42%~~(GFR).

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~~When GFR gets too low, 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~~develop end-stage kidney disease (ESKD) and require dialysis or a kidney transplant to survive.

We received a CRL from the FDA in February 2022 with respect to its review of our NDA for bardoxolone in the treatment of patients with CKD caused by Alport syndrome. We will continue to work with the FDA to confirm our next steps on our Alport syndrome ~~ADPKD,~~program. Kyowa Kirin is currently conducting its registrational AYAME trial of bardoxolone in diabetic (types 1 and ~~other rare forms of CKD.~~2) CKD in Japan.

Bardoxolone in Patients with CKD Caused by Alport Syndrome

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

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

On November 9, 2020, we ~~announced that~~reported interim results from the ~~Phase 3 CARDINAL study met its primary and key secondary endpoints at the end of Year 2. The Phase 3 portion of CARDINAL was~~long-term extension EAGLE trial. EAGLE is an international, multi-center, ~~double-blind, placebo-controlled, randomized registrational~~open-label, extended access trial ~~that enrolled 157~~evaluating the longer-term safety and tolerability of bardoxolone in patients with CKD caused by Alport syndrome ~~at approximately 50 study sites~~who participated in the ~~United States, Europe, Japan, and Australia. Patients were randomized one-to-one to bardoxolone~~CARDINAL trial or ~~placebo.~~

~~At Week 100,~~patients with ADPKD who participated in the 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 m~~²~~, while patients treated with placebo experienced a mean change from baseline in eGFR of -8.5 mL/min/1.73 m~~².

In the 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 m~~²~~, while patients treated with placebo experienced a mean decline from baseline in eGFR of -9.6 mL/min/1.73 m~~².

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 m~~²~~, while patients treated with placebo experienced a mean change from baseline in eGFR of -8.8 mL/min/1.73 m~~².FALCON trial. The primary endpoint was analyzed using mixed-model repeated measures with no imputation, and the key secondary endpoint was analyzed using analysis of covariance with treatment-based multiple 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. Eight patients (10%) receiving 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 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 mean decreases in 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 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 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.

~~Additionally, on November 9, 2020, we reported results from the long-term extension EAGLE study, in which the~~ change from baseline in eGFR was assessed for the 14 patients with Alport syndrome who were treated with bardoxolone for three years (two years in CARDINAL and one year in EAGLE), with four-week off-treatment periods occurring at Weeks 48 and 100. Bardoxolone treatment resulted in a mean on-treatment increase from baseline in eGFR of 11.5 mL/min/1.73 m² at Year 1, 13.3 mL/min/1.73 m2 at Year 2, and 11.0 mL/min/1.73 m2 at Year 3.

In February 2022, we provided the FDA with an update on results from patients with CKD caused by Alport syndrome in the ongoing EAGLE trial. Mean increases in eGFR were observed at Week 12, Week 24, and Week 48 relative to Day 0 (before treatment) in EAGLE in patients who previously received placebo and initiated treatment with bardoxolone in EAGLE. Patients who previously received bardoxolone for two years in CARDINAL experienced similar mean increases in eGFR at all timepoints. For the 37 patients randomized to bardoxolone in CARDINAL who completed 48 weeks in EAGLE, bardoxolone treatment resulted in a mean on-treatment change from baseline in eGFR (relative to original CARDINAL baseline) of 9.2 mL/min/1.73 m2 at Year 1, 7.8 mL/min/1.73 m2 at Year 2, and 6.7 mL/min/1.73 m2 at Year 3.

A subset of patients with Alport syndrome (n=18) completed 96 weeks of treatment in EAGLE, which amounts to approximately four years of total treatment, and had a mean ± standard error change in eGFR from CARDINAL baseline of 5.5 ± 3.5 mL/min/1.73 m2. This sustained improvement of kidney function is notable when compared to the CARDINAL ~~study~~trial 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.~~trial. No new safety findings have been identified in the EAGLE trial.

On ~~April 26, 2021,~~February 25, 2022, we ~~announced that~~received a CRL from the FDA ~~accepted for filing the~~with respect to its review of our NDA for bardoxolone for the treatment of patients with CKD caused by Alport syndrome, and the NDA is currently under review by the FDA. The FDA completed a bioresearch monitoring inspection of Reata. We did not receive any observations. We also recently completed the mid-cycle communication meeting with the FDA and were advised that an Advisory Committee meeting is tentatively scheduled for December 8, 2021. The PDUFA date, the FDA action date for the application, is scheduled for February 25, 2022.

The purpose of the mid-cycle communication meeting is for the FDA to provide the Sponsor with an update of the status of the NDA review, including any issues identified. As is customary with the review of all NDAs, the FDA may identify other issues, it may request additional information as it continues to review the NDA, and it may elect to delay the date of the Advisory Committee meeting or the PDUFA date.

~~While we have not yet received formal minutes from the FDA,~~ in the preliminary agenda for, and during, the meeting, the FDA identified four significant clinical and statistical review issues as discussed below. The FDA made additional information requests and identified a few additional issues that were not deemed significant. The FDA did not designate any safety issues as significant issues, and it stated that based on its current review, it does not believe a REMS program is needed. We were notified that we would be receiving comments in writing regarding CMC, and we will not be receiving any nonclinical comments. We believe each of these issues are addressable with additional data and analyses, and the FDA invited us to address its identified issues in follow-up submissions to the NDA. The following is a description of the significant issues discussed at the meeting and our approach to addressing each of the issues.

•

~~Acute Pharmacodynamic Effects vs. Slowing of Decline in Kidney Function:~~

Based on its preliminary analyses of available pharmacokinetic and eGFR data, the FDA questioned whether the observed eGFR increases suggest a slower rate of loss of kidney function in the bardoxolone group as compared to the placebo group. During the mid-cycle communication meeting, the FDA clarified that its preliminary analysis was computed using two distinct “chronic” eGFR slopes: a slope in Year 1 based on eGFR data from Week 12 to Week 48 and a slope in Year 2 based on Week 64 to Week 100. The FDA noted that the observed changes in eGFR loss in the bardoxolone group starting at Week 12 in Year 1 (after full manifestation of the acute eGFR increase) did not suggest a slower rate of loss of kidney function than the placebo group. As explained in greater detail below, the loss of eGFR from Weeks 12 to 48 in Year 1 is explained by the loss of eGFR in bardoxolone patients who discontinued early in the study. Importantly, the rate of eGFR loss from Week 64 (after full manifestation of the acute eGFR increase) to Week 100 in Year 2 is lower in the bardoxolone patients than the placebo patients. The FDA did not

comment specifically on the rate of eGFR decline in Year 2 of treatment. The FDA also did not comment on the off-treatment eGFR effects at Week 104 except to note that a critical ongoing review issue is whether these eGFR effects demonstrate an irreversible effect on kidney function or a reversible pharmacodynamic effect.

The loss of eGFR from Week 12 to Week 48 in Year 1 of CARDINAL is explained by the loss of eGFR in patients randomized to bardoxolone who discontinued treatment, and most discontinuations occurred early in the study. As shown in the figure below, patients who discontinued treatment experienced an acute increase in eGFR that was maximal at Week 12 and returned to placebo levels by Week 36. This loss of the initial acute eGFR effect after discontinuation of drug contributed to the apparent eGFR decline rate from Week 12 to Week 36 during Year 1 in the ITT analysis. Notably, after discontinuation, these patients performed like placebo patients. At the end of the study, their mean change from baseline was -8.4 ± 8.6 mL/min/1.73 m² ~~compared to -7.8 ± 10.6 in the placebo arm, respectively, and we believe this establishes that there was no deleterious effect of bardoxolone treatment on kidney function.~~

~~Patients who Discontinued Bardoxolone Progressed at Same Rate as Placebo Patients in Year 2~~

~~D/C (Discontinued): Change from baseline in eGFR for 26 bardoxolone patients who discontinued treatment by Week 100. (n) represents the number of D/C patients with eGFR values at each timepoint.~~

The purpose of chronic slope analyses is to compare average rates of eGFR change, after the onset of acute pharmacodynamic effects, to predict longer-term effects on kidney function. The NKF-FDA-EMA Scientific Working Group demonstrated that an accurate estimation of the rate of kidney function decline or chronic slope relies on long durations of follow-up (e.g., two to three-year periods of continuous dosing) to reliably predict a treatment effect on longer term clinical outcomes (Levey, 2020). CARDINAL was not designed to evaluate chronic slope because there is an off-treatment period between Weeks 48 and 52, so there was no chronic or continuous treatment to evaluate.

Moreover, the rate of kidney function decline from Week 12 to Week 36 in Year 1 was not observed in Year 2 or in the available data from Year 3 of the EAGLE ongoing long-term open-label extension study. We believe that this empirically establishes that any analysis performed of the Year 1 chronic slope is not predictive of the future rate of eGFR decline on bardoxolone treatment. Instead, we believe that the rate of decline in eGFR during the second year of treatment is most predictive of the rate of decline in Year 3 and beyond.

Data from Year 2 of CARDINAL show that bardoxolone-treated patients that restarted study drug at Week 52 experienced an acute increase in eGFR that was maximal at Week 64, twelve weeks after re-starting treatment and experienced a lower eGFR loss from Week 64 to Week 100 compared to the patients on placebo (as noted in the table below). This includes patients in the following groups: ITT population, patients in the prespecified mITT analysis, patients who achieved goal dose, and patients who did not achieve goal dose. Importantly, patients who remained on drug (i.e., mITT) and maintained their goal

dose had large reductions in their rate of decline versus placebo. In addition to the reduced rate of eGFR decline in Year 2, bardoxolone patients experienced large, absolute placebo-corrected improvements in eGFR at Week 100 across all analysis groups. Lastly, data from EAGLE demonstrate increases in eGFR in patients treated with bardoxolone in CARDINAL are sustained above baseline in the third year of treatment and beyond.

~~All Bardoxolone Patient Subgroups Progressed at a Slower Rate Relative to Placebo in Year 2~~

Mean eGFR Change from Baseline (mL/min/1.73 m²)
Placebo
ITT
Bardoxolone Methyl
ITT
mITT
Goal Dose
Below Goal Dose
Week 100 – Week 64
-3.34
-3.06
-2.30
0.17
-3.18
Week 100 CFB difference between treatment groups
-
7.65
11.29
16.77
7.14

We believe that the rate of decline in eGFR during the second year of treatment is most predictive of the rate of long-term disease progression. In addition, as noted above, bardoxolone-treated patients experienced a lower eGFR loss from Week 64 to Week 100 compared to the patients on placebo and this was in addition to a large, absolute placebo-corrected improvement in eGFR at Week 100 across all analysis groups. We believe these analyses demonstrate that in continuously treated patients, eGFR diverges from placebo over time and should delay ESKD.

•

~~Treatment Duration as a Covariate in Week 104 Analysis:~~

All clinical studies use an analysis model to compute the treatment effect and p-value. The analysis model incorporates observed data, as well as datasets that are generated for missing data. The process of generating datasets for missing data is called the imputation step, and it uses available reference data to produce these datasets. The statistical analysis plan (SAP) for CARDINAL pre-specified that change from baseline in eGFR for patients treated with bardoxolone would be compared to placebo at Week 104 using an Analysis of Covariance (ANCOVA) model. Both the imputation step and the analysis model can include covariates, or independent variables between patients, such as treatment group or baseline characteristics. The SAP pre-specified that missing data would be imputed for patients without Week 104 eGFR values based on their treatment group.

During the mid-cycle communication meeting, the FDA raised the question whether or not the proportion of two-year exposure to treatment was included as a covariate in the ANCOVA analysis model. During the meeting, we confirmed that this treatment duration covariate was included in the ANCOVA model used for the Week 104 analysis, and the FDA acknowledged that the analysis was conducted in accordance with, and did not deviate from, the pre-specified SAP. We noted that when the treatment duration covariate is excluded from the analysis the treatment effect and p-value are improved relative to the primary analysis.

During the meeting, we also discussed how the imputation step was conducted. The FDA suggested that the treatment duration covariate could have been included in the imputation step if a cap were included to limit extreme values. We noted that the SAP did not specify covariates for the imputation step and, therefore, neither the treatment duration covariate nor a cap was included in the imputation step of the analysis.

We explained that due to sparse reference data across the full range of treatment durations, inclusion of the treatment duration covariate in the imputation step would have resulted in over 30% of imputed eGFR values falling outside the range of observed eGFR values. Many of these values would have been extreme and exceeded biological plausibility. For example, the maximum change from baseline in the observed data was an increase of 28 mL/min/1.73 m²~~, while the maximum change from baseline in the imputed data would have been nearly four-times larger, with an increase of 105 mL/min/1.73 m~~²~~. We~~

therefore explained that, while the addition of these extreme values would not have affected the overall treatment effect at Week 104, it would have artificially more than doubled the standard error and inflated the p-value. For these reasons, we followed the pre-specified SAP methodology for the imputation step.

•

~~Sensitivity Analysis for Off-Treatment Analysis Window Duration:~~

CARDINAL pre-specified the Year 2 off-treatment analysis window to include eGFR values obtained at least 14 days after last dose, which is supported by pharmacokinetic and extensive off-treatment data demonstrating that the resolution of acute eGFR increases occurs by 14 days after the last dose. In CARDINAL, there was no association between the magnitude of off-treatment eGFR values and the post-dose period in Year 2. These results establish that values collected in the earlier part of the analysis window did not bias or affect the conclusions of the off-treatment endpoint.

Alport syndrome is a rare disease, which limited the overall size of CARDINAL. The study, therefore, had limited power to show treatment effects that meet conventional levels of statistical significance in certain sensitivity analyses for more prevalent diseases. Nevertheless, the FDA has conducted a series of sensitivity analyses to test the significance of the Year 2 key secondary results under a variety of scenarios.

The FDA conducted a sensitivity analysis to assess the impact of the analysis window on the results of the Year 2 off-treatment endpoint. One of the FDA’s sensitivity analyses included off-treatment eGFR values approximately 104 weeks after randomization, irrespective of time off-drug, which resulted in loss of statistical significance for the result. Approximately one-half (12/26) of discontinuations in patients treated with bardoxolone occurred within the first 16 weeks of treatment, and these patients were therefore off-treatment for a minimum of 88 weeks at the time of their Week 104 assessment. When patients discontinued bardoxolone, their eGFR trajectory was similar to placebo patients. Including these patients that had been off active drug for a long period of time inherently dilutes the treatment effect in the sensitivity analysis. Despite this, the treatment effect in the analysis favored bardoxolone even when including these patients in the Week 104 analysis. Furthermore, based on the precedent established in the REPRISE study of tolvaptan for the treatment of patients with ADPKD, we powered CARDINAL to assess the off-treatment effect of bardoxolone by including eGFR values collected at least 14 days after last dose, rather than powering the trial to include eGFR values 104 weeks after randomization for all patients including those who discontinued treatment early.

~~Mean Off-Treatment Changes from Baseline in eGFR by the Number of Days~~

~~after Last Dose of Study Drug for Bardoxolone Methyl Patients~~

Year 2 (Week 104)
Days Post-Dose
Change from Baseline in eGFR (mL/min/1.73 m²)
≥14 to <21 Days
≥21 to <28 Days
≥28 to <35 Days
≥35
Days
N
1
20
27
8
Mean (SD)
-3.80
-4.25 (16.2)
-4.37 (10.5)
-0.18 (13.1)
Median
-3.8
-2.3
-5.4
-2.1

Two of the FDA’s other sensitivity analyses only included values collected ≥28 days after last dose. These analyses excluded nearly one-half of the trial participants and violated randomization principles, which resulted in modeled estimates that meaningfully differed from observed Week 104 eGFR changes. We performed sensitivity analyses similar to those performed by the FDA that included more available off-treatment eGFR data by using a cutoff of at least 21 days after last dose. The results for these new analyses were similar to the primary Week 104 analyses and will be provided to the FDA as a follow-up to this meeting.

•

~~Impact of COVID-19:~~

The FDA acknowledged that COVID-19 did not significantly impact treatment visits, data collection, or study drug dispensation. However, the FDA noted that there appeared to be discrepancies between the trial’s findings when analyzed according to Year 2 data collected in patients pre-COVID versus post-COVID, with the study findings driven by the post-COVID subgroup. We utilize March 1, 2020 as the date of the start of the global COVID-19 pandemic to define the pre- versus post-COVID periods. Due to timing of study conduct, 31% of Week 104 assessments were conducted pre-COVID, and 69% of Week 104 assessments were conducted post-COVID.

Given the relatively small sample size in CARDINAL, the study had limited power to show treatment effects in small subgroups. The sample size of the study and the limited number of assessments that occurred during the pre-COVID period precludes over interpretation of pre- versus post-COVID analyses.

Although differences were observed for the pre- and post-COVID results for the Week 104 endpoint, we noted that the point estimate for the change from baseline in eGFR at Week 104 is similar across both periods for bardoxolone-treated patients. The difference between treatment groups pre- and post-COVID was driven by the inclusion of a larger number of pediatric patients in the post-COVID subgroup. These patients generally had more rapid disease progression, enrolled later in the trial, and, therefore, had Week 104 assessments conducted during COVID.

•

~~Safety:~~

During the mid-cycle communication meeting, the FDA did not communicate significant issues about any safety topics, and it stated that, based on its current review, it does not believe a REMS is needed.

~~We plan to address each of these issues through the submission of additional data and analyses to the NDA.~~

~~Ex-U.S. Updates for Bardoxolone in Patients with CKD Caused by Alport Syndrome~~

We also plan to pursue marketing approval outside of the United States. We plan to submit an MAA with the EMA in the fourth quarter of 2021 for marketing approval of bardoxolone for the treatment of CKD caused by Alport syndrome in the European Union.

~~On July 27, 2021, KKC, our partner in Japan, submitted an NDA in Japan to the MHLW for bardoxolone for~~ the treatment of patients with CKD caused by Alport syndrome. The CRL indicated that the FDA cannot approve the NDA in its present form. Based on ~~this submission,~~its review, the FDA concluded that it does not believe the submitted data demonstrates that bardoxolone is effective in slowing the loss of kidney function in patients with Alport syndrome and reducing the risk of progression to kidney failure and has requested additional data to support the efficacy and safety of bardoxolone. Their conclusion was based on efficacy and safety concerns primarily set forth in the FDA’s briefing book and discussed at the Cardiovascular and Renal Drugs Advisory Committee meeting held on December 8, 2021.

The FDA stated that the issues could be resolved by providing evidence of effectiveness that includes evidence from an adequate and well-controlled study showing a clinically relevant effect on the rate of loss of kidney function in patients with Alport syndrome or, alternatively, an effect on a clinical outcome (i.e., an endpoint that captures how patients with Alport syndrome feel, function, or survive). In addition, the FDA stated that we ~~have earned~~would need to address whether bardoxolone has a ~~$5 million milestone payment under~~clinically relevant effect on the ~~KKC Agreement. If approved for commercial sales, KKC is required to pay us royalties on net sales~~QT interval and show that the demonstrated clinical benefits of bardoxolone outweigh its risks. The FDA welcomed continued discussion on the details of a path forward. We plan to work closely with the FDA to achieve our goal of bringing this important medicine to patients in ~~its territory ranging~~the United States.

In October 2021, we submitted an MAA to the EMA for bardoxolone in the treatment of patients with CKD caused by Alport syndrome. In the first quarter of 2022, we received the 120-day list of questions from the ~~low teens to~~EMA. We are in the ~~low 20% range depending on~~process of preparing our responses. We requested a 90-day extension for our responses which was granted by the ~~country of sale and~~EMA. The timeline for the ~~amount of annual net sales.~~EMA’s review cycle was therefore extended.

Bardoxolone in 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. Inflammation appears to play a role in cyst growth and is associated with disease progression in ADPKD.

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

We are currently enrolling patients in FALCON, an international, multi-center, randomized, double-blind, placebo-controlled ~~Phase 3~~ trial studying the safety and efficacy of bardoxolone in patients with ADPKD randomized one-to-one to active drug or placebo. ~~The protocol currently specifies that the study will enroll approximately 550~~FALCON is enrolling patients in a broad range of ages, ~~18 to 70 years old,~~ with an eGFR between 30 toand 90 mL/min/1.73 m2.

In the firstquarter of 2022, we finalized a protocol amendment to FALCON, and we initiated submission of the amendment to the FDA and other relevant health authorities. The ~~current~~major protocol amendment changes include an increase in the sample size from 550 to 850 patients, addition of adolescent (12 to 17 years) patients with ADPKD for a total age range of 12 to 70 years, removal of the off-treatment period (Week 48 – Week 52) during Year 1, change of the primary endpoint ~~is the~~of off-treatment eGFR change from baseline ~~versus placebo~~ at

Week 52 ~~which represents 48~~(or four weeks ~~of treatment followed by a four-week withdrawal period. At 52 weeks, patients resume treatment for a second 48-week period~~after drug discontinuation in Year 1) to ~~Week 100 followed by a second four-week withdrawal period to Week 104. The key secondary endpoint is the off treatment~~ eGFR change from baseline ~~versus placebo~~ at Week ~~104.~~108 (eight weeks after planned drug discontinuation at Week 100). The protocol amendment also includes addition of an exploratory endpoint of eGFR change from baseline at Week 112 (12 weeks after planned drug discontinuation at Week 100), and addition of a sub study with ambulatory blood pressure monitoring.

As agreed with the FDA prior to submission of the amendment, we recently had a Type BA meeting ~~with the FDA regarding the ADPKD development program. We have not received minutes from the meeting yet, however, based on the discussion in the meeting, we are considering amendments~~to discuss key changes made to the FALCON protocol. Based on ~~our experience~~the discussion during the CARDINAL trial in Alport syndrome patients, we requested the FDA’s input regarding the feasibility of using Year 1 data to support early submission and accelerated approval. We acknowledged with the FDA that, like our experience in CARDINAL, the timing of clinical study milestones at Year 1meeting and the ~~required regulatory interactions prior to an initial submission may not allow sufficient time, as previously noted by~~meeting minutes, the ~~FDA, to submit~~Division stated that the ~~initial application before~~proposed primary endpoint of eGFR change from baseline at Week 108 (8 weeks after planned drug discontinuation at Week 100) was reasonable since the available data suggest that bardoxolone’s acute pharmacodynamic effect on eGFR should be largely resolved. The Division provided guidance on handling of data from patients who completed Year 2 ~~data are available. Thus, while~~of the study ~~uses~~before the protocol amendment and so did not have an ~~efficient study design that is intended to support an early submission, its ability to support an early NDA may not be possible.~~

~~In response to our inquiry, we were notified by~~eGFR assessment at Week 108. This included direction on imputing missing data for these patients in the FDA that it is unlikely that results from the first year of the trial would support an application for accelerated approval. As such, the FDA recommended against unblinding the trial after the first year and conducting the proposed Year 1primary analysis. The ~~FDA instead encouraged us~~Division stated that, in addition to ~~specify the Year 2 off-treatment analysis as the primary endpoint. We plan to modify the protocol so that~~ the primary endpoint, it will be important to demonstrate that the ~~Year 2 off-treatment analysis,~~treatment effect accrues over time to support a claim that bardoxolone slows the loss of kidney function in patients with ADPKD and ~~we will not unblind~~provided guidance on the ~~trial until completion of Year 2.~~

statistical methodologies for the exploratory eGFR slope analyses. The FDA also ~~questioned whether an off-treatment period of 28 days~~confirmed that if FALCON is adequate to ensure resolution of bardoxolone’s acute, reversible, eGFR increases. We provided information in our pre-meeting materials demonstrating resolution by 14 days after the last dose, and the FDA noted thatpositive, it ~~had not reviewed the largest dataset from two short-term studies demonstrating resolution within 28 days. These studies are not confounded by any long-term effects~~could support registration of bardoxolone ~~treatment or meaningful disease progression. We have since further clarified and provided this additional data~~in ADPKD.

Pursuant to the ~~FDA. In order to confirm that the acute eGFR increases resolve within 28 days, we~~protocol amendment, patients will be ~~adding an eight-week off-treatment visit~~treated with bardoxolone or placebo for 100 weeks followed by a twelve-week withdrawal period. The trial will remain blinded until study completion. All patients will be asked to return at Week 108 independent of the ~~study.~~

~~Our current SAP specifies that patients who do not receive at least one dose~~time of study drug indiscontinuation. The secondary endpoint is the ~~second year will be considered missing in the~~eGFR change from baseline at Week 104 analysis. The FDA recommended also evaluating the key efficacy endpoint using eGFR values obtained at specified timepoints (i.e., 104 weeks after randomization), regardless of whether a patient discontinued study treatment at an earlier timepoint. This is similar to one of the sensitivity analyses conducted by the FDA during review of our Alport syndrome NDA. We will be incorporating the FDA’s feedback and submitting the revised SAP for the FDA review.

~~Based on the above discussion, we may need to increase the patient sample size from the current target of 550 patients.~~100. More than ~~370~~550 patients are currently enrolled in the ~~study. We continue to expect to enroll 550 patients~~trial.

AYAME Trial in ~~FALCON~~Diabetic CKD Conducted by ~~the end~~Kyowa Kirin

Upon completion of ~~2021. However, if we decide to increase the target enrollment, we will provide updated guidance on our enrollment timeline.~~

~~Bardoxolone in Patients with CKD at Risk of Rapid Progression~~

~~MERLIN is a multi-center, double-blind, placebo-controlled,~~Kyowa Kirin's Phase 2 TSUBAKI trial ~~to evaluate the safety and efficacy~~ of bardoxolone in patients ~~at risk of rapidly progressing~~with Stage 3 and 4 diabetic CKD ~~due to multiple etiologies including IgAN, FSGS, T1D CKD, T2D CKD, hypertensive CKD,~~in Japan, and ~~others. The study includes~~after discussions with the Pharmaceuticals and Medical Devices Agency, Kyowa Kirin initiated a Phase 3 outcomes trial called AYAME in patients with ~~eGFR between 20 and 60 mL/min/1.73 m~~²~~, and patients must meet at least one of the following criteria: UACR ≥ 300 mg/g; eGFR decline at a rate of ≥~~Stage 3 or 4 ~~mL/min/1.73 m~~²diabetic CKD 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.Japan. The primary endpoint is time to onset of ~~the trial is~~a ≥ 30% decrease in eGFR from baseline or ESKD. The secondary endpoints are time to onset of a ≥ 40% decrease in eGFR from baseline or ESKD, time to onset of a ≥ 53% decrease in eGFR from baseline or ESKD, time to onset of ESKD, and change in eGFR from baseline ~~to Week 12.~~

~~We have~~at each evaluation time point. Kyowa Kirin completed patient enrollment in AYAME in June 2019 and expects the ~~MERLIN trial. We expect~~last patient visit to ~~have top-line data~~occur in the ~~fourth quarter~~second half of ~~2021. If~~2022.

U.S. Commercial Readiness

With the ~~results~~NDA submission of ~~this study~~omaveloxolone complete, we 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 ADPKD, IgAN, T1D CKD, or FSGS completed in 2019. In each of these cohorts, patients treated with bardoxolone experienced a statistically significant increase from baseline in mean 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 serious forms of CKD, maintaining our intent to expand theadvancing commercial ~~indications for bardoxolone.~~

~~Historical Development of Bardoxolone~~

Prior to our CARDINAL 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 seven distinct patient populations treated with bardoxolone, including patients with pulmonary hypertension and CKD caused by T2D CKD, Alport syndrome, ADPKD, IgAN, T1D CKD, and FSGS.

We believe these data, in addition to the CARDINAL Phase 3 data, support the potential for bardoxolone to delay or prevent GFR declines that cause the need for dialysis or kidney transplant, and eventually death in patients with Alport syndrome and other forms of CKD.

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

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Statistically significant increases in directly-measured GFR using the “gold standard” inulin clearance method, improvements in creatinine clearance, and reduction in the levels of blood waste products filtered by the kidney.

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~~Statistically significant improvements in eGFR versus baseline or placebo in six different types of CKD, including Alport syndrome, ADPKD, IgAN, T1D CKD, T2D CKD, and FSGS.~~

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~~Sustained improvement in kidney function in long-term trials:~~

~~In the Phase 2 portion of CARDINAL, bardoxolone treatment produced a statistically significant increase from baseline in mean eGFR of 10.4 mL/min/1.73 m~~² (p<0.0001) after 48 weeks of treatment, which, based on historical data available for 22 of the patients prior to enrolling in the trial, represents a recovery of over two years of average decline in kidney function.

~~In two large, placebo-controlled clinical studies (BEAM and BEACON) in patients with T2D CKD, statistically significant increases in mean eGFR of 14.9 mL/min/1.73 m~~² ~~(p<0.001) and 5.6 mL/min/1.73 m~~² ~~(p<0.001), respectively, were sustained for at least one year.~~

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~~Reduction in risk of adverse kidney outcomes, suggesting that bardoxolone treatment preserves kidney function and may delay the onset of kidney failure in patients with T2D and stage 4 CKD:~~

In BEACON, patients randomized to bardoxolone were significantly less likely to experience adverse kidney outcomes as defined by a composite endpoint consisting of ≥30% decline from baseline in eGFR, eGFR <15 mL/min/1.73 m²~~, or ESKD events (HR=0.48, p<0.0001).~~

~~In BEACON, bardoxolone treatment resulted in a decreased number of kidney-related SAEs and ESKD events.~~

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Statistically significant improvement in eGFR above baseline or versus placebo during the off-treatment period in BEAM, BEACON, the Phase 2 portion of CARDINAL at one year, and the Phase 3 portion of CARDINAL at one and two years.

~~The FDA has provided guidance to us and other sponsors that clinical trials with an eGFR benefit versus placebo during the off-treatment period may support approval in certain rare forms of CKD.~~

We believe that the increase in off-treatment eGFR relative to placebo shows that increases in eGFR due to bardoxolone over longer durations do not have detrimental effects on kidney function. Most importantly, the observed eGFR benefit versus placebo during the off-treatment periods in these clinical trials demonstrates that bardoxolone treatment may have resulted in structural improvement, modifying the course of the disease, and delaying the need for dialysis or kidney transplant.

~~Programs in Neurological Diseases~~

~~Omaveloxolone in Patients with Friedreich’s Ataxia (FA)~~

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 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 adultslaunch preparations 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 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.

The FDA provided us guidance that, although it does not have concerns with the reliability of the mFARS primary endpoint results from MOXIe Part 2, it was not convinced that the results from MOXIe Part 2, as a single study, were sufficient to support approval. The FDA stated that we 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, to increase the 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 the double-blind period from MOXIe Part 2 through 48 weeks in the MOXIe Extension could provide evidence of disease-modifying activity. A total of 73 out of 75 (97%) patients without ~~pes cavus~~ who completed MOXIe Part 2 enrolled in the MOXIe Extension. A longitudinal analysis used to calculate annualized slopes incorporating all available data from the MOXIe Extension showed similar slopes in mFARS for the placebo-to-omaveloxolone group (0.59 points per year) when compared to the omaveloxolone-to-omaveloxolone group (0.41 points per year) with no significant difference between slopes (p=0.75). The resulting parallel trajectories between both treatment groups are consistent with disease-modifying activity. We requested and were granted a Type C meeting to discuss whether the data would support an NDA submission.

On May 19, 2021, we received a communication from the FDA suggesting that, after a preliminary review of briefing materials for the Type C meeting including the Delayed-Start Analyses, a pre-NDA meeting is the most appropriate format for a discussion of the development program for omaveloxolone in FA. The FDA also suggested that we withdraw the current Type C meeting request and instead request a pre-NDA meeting. During the second quarter of 2021, we withdrew our request for a Type C meeting and requested a pre-NDA meeting with the FDA. The pre-NDA meeting request has been granted, a pre-NDA meeting has been scheduled during the third quarter

of this year, and we have submitted briefing materials for the meeting. We recently received a communication from the FDA requesting the estimated date of our NDA submission for its planning purposes. We plan to submit the NDA during the first quarter of 2022.

~~Omaveloxolone in Other Potential Indications~~

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, and frontotemporal dementia. In clinical trials, improvements in neuromuscular function have been observed in FA patients treated with omaveloxolone as assessed by mFARS rating scale, and improvements in mitochondrial function, as measured by reductions in blood lactate and heart rate, have been observed in patients with primary mitochondrial disease. Accordingly, we believe that omaveloxolone has the potential to treat a number of neurological and neuromuscular diseases that currently have few or no effective therapies, and we plan to pursue the development of omaveloxolone and our other Nrf2 activators for one or more of these diseases.

~~RTA 901 in Neurodegeneration and Neuroprotection Diseases~~

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 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 (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 those necessary for efficacy in multiple animal models. No safety or tolerability concerns were reported. Due to slight delays in clinical drug supply, we now plan to initiate additional Phase 1 studies to evaluate the PK and drug-drug interaction potential of RTA 901 in the fourth quarter of 2021 and a randomized, placebo-controlled Phase 2 study in diabetic peripheral neuropathic pain (DPNP) in the first 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 maintain worldwide commercial rights.

~~RTA 1700 Series~~

In addition to our lead programs, we are developing a proprietary series of RORγt inhibitors for the potential treatment of a broad range of autoimmune, inflammatory, and fibrotic diseases. We have conducted a Phase 1 trial to evaluate the safety, tolerability, and PK profile of RTA 1701 in healthy adult volunteers. RTA 1701 had no safety concerns, was well tolerated, and we observed an acceptable PK profile. Plasma concentrations were achieved that are associated with efficacy in preclinical models of autoimmune disease. Due to RTA 1701’s ADME (absorption, distribution, metabolism, and excretion) properties and the potential for drug-drug interactions at clinically relevant concentrations, we have discontinued the development of RTA 1701 and are proceeding with the development of follow-on molecules in the 1700 series. We have identified follow-on molecules that do not have these liabilities, and we are conducting studies to determine the new lead molecule. We remain committed to developing RORγt inhibitors for the treatment of autoimmune, inflammatory, and fibrotic diseases. We retain all rights to our RORγt inhibitors, which are not subject to any existing commercial collaborations.

~~Commercial Readiness~~

States. We are in the process of building the commercial infrastructure ~~in the United States~~ necessary to effectively support the commercialization of ~~our product candidates,~~omaveloxolone for the treatment of FA, if and when we receive regulatory ~~approval of such product candidates~~approval. Commercial launch preparation for omaveloxolone in FA will continue to advance in step with the ~~United States and Europe.~~ regulatory progress.

Our ability to launch ~~bardoxolone and~~ omaveloxolone is dependent on the ~~acceptance~~successful filing and ~~successful~~ defense of an NDA and ~~MAA and~~ approval by the ~~FDA and EMA, respectively.~~

~~In the United States, we~~FDA. We have hired commercial ~~leaders, are expanding quality~~leadership and ~~compliance functions~~intend to ~~support commercialization, and are building~~build the ~~organization,~~teams, infrastructure, systems, and processes necessary for the launch of ~~bardoxolone, including~~omaveloxolone. This will include sales, marketing, market access, patient support, and distribution. Additionally, we are expanding quality and compliance functions to support commercialization. A trade name for omaveloxolone has been selected.

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

Ex-U.S. Commercial Readiness

Our ability to launch omaveloxolone is dependent on the successful filing and defense of an MAA and approval by EMA or other regulatory agencies. Outside of the United States, where appropriate and depending on the terms of our contractual arrangements, we plan, either alone, or with new collaboration partners, to commercialize our products. Our strategic collaborator Kyowa Kirin has all rights to commercialize bardoxolone in its territories. We ~~have also recently hired a team of payer account directors focused on educating private~~are refining our strategy and ~~public payers about Alport syndrome, disease severity,~~market assessments with respect to potential launches in the EU, and ~~the need~~we continue to ~~treat diagnosed patients. Their role is to facilitate coverage and reimbursement of bardoxolone~~evaluate market opportunities for ~~Alport syndrome upon approval.~~

~~We have reinitiated~~ our products in other global markets. Commercial launch ~~readiness efforts~~preparation for omaveloxolone in FA inoutside of the United ~~States. We are efficiently building core functions for our bardoxolone program to also support~~States will advance in step with the ~~planned launch of omaveloxolone for FA.~~regulatory progress.

If and when we receive regulatory approval for our product candidates, we plan to 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 our sales teams and have launched disease awareness campaigns to educate physicians about Alport syndrome and FA. Trade names for bardoxolone and omaveloxolone have been selected.

Corporate Overview

To date, we have focused most of our efforts and resources on developing our product candidates and conducting preclinical studies and clinical trials. We have historically financed our operations primarily through revenue generated from our collaborations with AbbVie and ~~KKC,~~Kyowa Kirin, from sales of our securities, secured loans, and a strategic financing from BXLS. We have not received any payments or revenue from collaborations other than nonrefundable upfront, milestone, and cost sharing payments from our collaborations with AbbVie and ~~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 ~~June 30, 2021,~~March 31, 2022, we had ~~$755.7~~$532.0 million of cash and cash equivalents and an accumulated deficit of ~~$1,098.4~~$1,329.5 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 potentially commercialize our product candidates. If we do not successfully develop and obtain regulatory approval of our existing product candidates or any future product candidates and effectively manufacture, market, and sell any products that are

approved, we may never generate revenue from product sales. Furthermore, even if we do generate revenue from product sales, we may never again achieve or sustain profitability on a quarterly or annual basis. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital. Our failure to become and remain profitable could depress the market price of our Class A common stock and could impair our ability to raise capital, expand our business, diversify our product offerings, or continue our operations.

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

Financial Operations Overview

Revenue

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

Our license and milestone revenue has been generated primarily from the ~~KKC~~Kyowa Kirin Agreement, the AbbVie License Agreement, and the Collaboration Agreement and consists of upfront payments and milestone payments. License revenue recorded with respect to the ~~KKC~~Kyowa Kirin Agreement, the AbbVie License Agreement, and the Collaboration Agreement consists solely of the recognition of deferred revenue. Under our revenue recognition policy, collaboration revenue associated with upfront, non-refundable license payments received under our license and collaboration agreements are deferred and recognized ratably over the expected term of the performance obligations under each agreement. Under the Reacquisition Agreement, we no longer have performance obligations under the AbbVie License Agreement and the Collaboration Agreement. Under the ~~KKC~~Kyowa Kirin Agreement, we only expect to recognize the deferred revenue through ~~mid-2022.~~June 2022.

Research and Development Expenses

The largest component of our total operating expenses has historically been our investment in research and development activities, including the clinical development of our product candidates. From our inception through ~~June 30, 2021,~~March 31, 2022, we have incurred a total of ~~$1,008.9~~$1,129.7 million in research and development expense, a majority of which relates to the development of bardoxolone and omaveloxolone. We expect our research and development expense to continue to increase in the future as we advance our product candidates through clinical trials and expand our product candidate portfolio. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and we consider the active management and development of our clinical pipeline to be crucial to our long-term success. The actual probability of success for each product candidate and preclinical program may be affected by a variety of factors, including the safety and efficacy data for product candidates, investment in the program, competition, manufacturing capability, and commercial viability.

Research and development expenses include:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We base our expense accruals related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical trials 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. Kyowa Kirin is the in-country caretaker in our FALCON study in Japan and ~~is paying~~we are reimbursing Kyowa Kirin for the costs of a certain number of patients asin the ~~in-country caretaker in our FALCON study in Japan.~~study.

The following table summarizes our research and development expenses ~~incurred:~~incurred during the three months ended March 31:

	Three Months Ended				Six Months Ended
	June 30				June 30
	2021		2020		2021		2020		2022		2021
	(in thousands)								(in thousands)
Bardoxolone	$	14,979	$	9,736	$	26,365	$	23,653	$	6,462	$	11,386
Omaveloxolone		482		8,313		2,954		14,942		7,597		2,473
RTA 901		3,121		750		3,827		1,961		1,407		706
Other research and development expenses⁽¹⁾		21,484		17,984		41,800		43,880
Other research and development expenses (1)										24,338		20,315
Total research and development expenses	$	40,066	$	36,783	$	74,946	$	84,436	$	39,804	$	34,880

(1) RTA 1701 expenses have been included in other research and development expenses due to development updates in the program. ~~See discussion in~~ ~~Other Clinical Programs~~ ~~section above.~~

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

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~~increase our headcount to support our continued research and development and potential commercialization of our product candidates. We have also incurred, and anticipate incurring in the future, increased expenses associated with being a public company, including exchange listing and SEC requirements, director and officer insurance premiums, legal, audit and tax fees, compliance with the Sarbanes-Oxley Act, ~~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), Net

Other income (expense) includes interest and gains earned on our cash and cash equivalents, ~~interest expense on 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.

Benefit from (Provision for) Taxes on Income

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

Results of Operations

Comparison of the Three Months Ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ (unaudited)

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


													2022			2021			Change $			Change %
	2021			2020			Change $			Change %			(in thousands, except for percentage data)
Collaboration revenue
License and milestone	$	803		$	1,169		$	(366	)		(31	)	$	893		$	795		$	98			12
Other revenue		1,418			1,904			(486	)		(26	)		21			149			(128	)		(86	)
Total collaboration revenue		2,221			3,073			(852	)		(28	)		914			944			(30	)		(3	)
Expenses
Research and development		40,066			36,783			3,283			9			39,804			34,880			4,924			14
General and administrative		21,998			16,600			5,398			33			24,841			20,704			4,137			20
Depreciation		287			284			3			1			308			274			34			12
Total expenses		62,351			53,667			8,684			16			64,953			55,858			9,095			16
Other income (expense), net		(13,223	)		(16,990	)		3,767		**				(9,772	)		(12,556	)		2,784			22
Loss before taxes on income		(73,353	)		(67,584	)		(5,769	)		(9	)		(73,811	)		(67,470	)		(6,341	)		(9	)
Benefit from (provision for) taxes on income		653			3			650		**				(31	)		15			(46	)	**
Net loss	$	(72,700	)	$	(67,581	)	$	(5,119	)		(8	)	$	(73,842	)	$	(67,455	)	$	(6,387	)		(9	)

** Percentage not meaningful

Revenue

License and milestone revenue represented approximately ~~36%~~98% and ~~38%~~84% of total revenue for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively, and consisted of the recognition of ~~KKC~~Kyowa Kirin deferred revenue. ~~The decrease in license~~License and milestone revenue is primarily due to the extension of our performance obligation period under the KKC Agreement in the first quarter of 2021. Accordingly, the quarterly recognition of the deferred revenue under the KKC Agreement was reduced from $1.2 million to $0.8 million.

~~Other revenue decreased~~increased by 12% during the three months ended ~~June 30, 2021,~~March 31, 2022, compared to the three months ended ~~June 30, 2020,~~March 31, 2021, primarily due to the achievement of a ~~decrease~~regulatory milestone in ~~reimbursements of expenses from KKC for manufacturing and non-clinical study expenses incurred.~~July 2021, variable consideration previously considered constrained, under the Kyowa Kirin Agreement.

~~Expenses~~Other revenue was immaterial for the three months ended March 31, 2022, and 2021.

Expenses

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


	2021		% of Total Expenses			2020		% of Total Expenses			2022		% of Total Expenses			2021		% of Total Expenses
	(in thousands)										(in thousands, except for percentage data)
Research and development	$	40,066		64	%	$	36,783		68	%	$	39,804		61	%	$	34,880		62	%
General and administrative		21,998		35	%		16,600		31	%		24,841		38	%		20,704		37	%
Depreciation		287		1	%		284		1	%		308		1	%		274		1	%
Total expenses	$	62,351				$	53,667				$	64,953				$	55,858

Research and Development Expenses

Research and development expenses increased by ~~$3.3~~$4.9 million, or 9%14%, for the three months ended ~~June 30, 2021,~~March 31, 2022, compared to the three months ended ~~June 30, 2020.~~March 31, 2021. The increase was primarily due to increased spend related to ongoing clinical study expenses related to bardoxolone and RTA 901 and medical affairs activities for bardoxolone to support disease awareness and education activities. The remaining changes included an increase in personnel and personnel-related costs to support the ~~growth of our~~product development ~~activities, offset by decreased stock-based compensation expense due to accelerated expense recognized during 2020.~~ activities.

Research and development expenses, as a percentage of total expenses, was ~~64%~~61% and ~~68%~~62% for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. The decrease of 4% was due to the proportionately larger increase in general and administrative expenses, which included increases in commercial readiness activities that had previously been decreased due to delays in our regulatory submission.

~~General and Administrative Expenses~~

General and administrative expenses increased by $5.4 million, or 33%, for the three months ended June 30, 2021, compared to the three months ended June 30, 2020. The increase was primarily due to increased spend related to commercial readiness activities and personnel and personnel-related costs to support growth in our development activities.

~~General and administrative expenses, as a percentage of total expenses, was 35% and 31%, for the three months ended June 30, 2021, and 2020, respectively. The increase of 4%~~1% was due to the proportionately larger increase in general and administrative expenses, compared to research and development expenses.

~~Other Income (Expense), Net~~General and Administrative Expenses

~~Other income (expense), net decreased~~General and administrative expenses increased by ~~$3.8~~$4.1 million, or 20%, for the three months ended ~~June 30, 2021,~~March 31, 2022, compared to the three months ended June 30, 2020. The decrease was primarily due to decreased interest expense and loss on extinguishment of debt due to the payoff on our Term Loans in 2020, offset by an increase in non-cash interest expense on liability related to the sale of future royalties.

~~Benefit from (Provision for) Taxes on Income~~

~~Benefit from taxes on income was immaterial for the three months ended June 30, 2021, compared to the three months ended June 30, 2020.~~

~~Comparison of the Six Months Ended June 2021, and 2020 (unaudited)~~

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

2021

2020

Change $

Change %

Collaboration revenue

License and milestone

$
1,598

$
2,338

$
(740
)

(32
)
Other revenue

1,568

2,088

(520
)

(25
)
Total collaboration revenue

3,166

4,426

(1,260
)

(28
)
Expenses

Research and development

74,946

84,436

(9,490
)

(11
)
General and administrative

42,703

37,387

5,316

14

Depreciation

561

562

(1
)

(0
)
Total expenses

118,210

122,385

(4,175
)

(3
)
Other income (expense), net

(25,780
)

(20,804
)

(4,976
)

**

Loss before taxes on income

(140,824
)

(138,763
)

(2,061
)

(1
)
Benefit from (provision for) taxes on income

669

22,243

(21,574
)

(97
)
Net loss

$
(140,155
)

$
(116,520
)

$
(23,635
)

(20
)

** Percentage not meaningful

~~Revenue~~

License and milestone revenue represented approximately 50% and 53% of total revenue for the six months ended June 30, 2021 and 2020, respectively, and consisted of the recognition of KKC deferred revenue. The decrease in license and milestone revenue is primarily due to the extension of our performance obligation period under the KKC Agreement in the first quarter ofMarch 31, 2021.

Other revenue decreased in the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to a decrease in reimbursements of expenses from KKC for manufacturing and non-clinical study expenses incurred.

~~Expenses~~

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

2021

% of Total
Expenses

2020

% of Total
Expenses

(in thousands)

Research and development

$
74,946

63
%

$
84,436

69
%
General and administrative

42,703

36
%

37,387

30
%
Depreciation

561

1
%

562

1
%
Total expenses

$
118,210

$
122,385

~~Research and Development Expenses~~

Research and development expenses decreased by $9.5 million, or 11%, for the six months ended June 30, 2021, compared to the six months ended June 30, 2020. The decrease was primarily due to decreased clinical and manufacturing activities completed in 2020 related to omaveloxolone and RTA 1701, offset by increased clinical activities for RTA 901. The remaining changes included decreased stock-based compensation expense due to accelerated expense recognized during 2020, offset by an increase in personnel and personnel-related costs to support the growth of our development activities.

Research and development expenses, as a percentage of total expenses, was 63% and 69% for the six months ended June 30, 2021, and 2020, respectively. The decrease of 6% was due to the proportionately larger increase in general and administrative expenses, which included increases in commercial readiness activities that

~~had been decreased due to delays in our regulatory submission and a larger increase in personnel and personnel-related costs compared to research and development.~~

~~General and Administrative Expenses~~

~~General and administrative expenses increased by $5.3 million, or 14%, for the six months ended June 30, 2021, compared to the six months ended June 30, 2020.~~ The increase was primarily due to ~~increased spend~~rent expense related to ~~commercial readiness activities and personnel and personnel-related costs to support growth~~the new headquarters building lease that commenced in ~~our development activities.~~December 2021.

General and administrative expenses, as a percentage of total expenses, was ~~36%~~38% and ~~30%~~37%, for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. The increase of 6%1% was due to the proportionately larger increase in general and administrative expenses, compared to research and development expenses.

Other Income (Expense), Net

Other income (expense), net ~~increased~~decreased by ~~$5.0~~$2.8 million for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, compared to the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021. The ~~increase~~decrease was primarily due to ~~increased~~a decrease in effective interest rate in non-cash interest expense on liability related to the sale of future royalties.

We periodically reassess the expected royalty payments under the Development Agreement, and to the extent such payment is greater or less than the initial estimate, we adjust the amortization. Based on our review in the current first quarter of 2022, we lowered our previous estimate of future sales for which royalties will be paid. Accordingly, we have prospectively adjusted and ~~decreased interest income earned due to~~recognized lower ~~market rates, offset by decreased~~non-cash interest expense ~~and loss on extinguishment of debt due to~~during the ~~payoff on our Term Loans in 2020.~~quarter ended March 31, 2022.

Benefit from (Provision for) Taxes on Income

Benefit from (Provision for) taxes on income ~~decreased by $21.6 million~~was immaterial for the ~~six~~three months ended ~~June 30, 2021, compared to the six months ended June 30, 2020, primarily due to a tax benefit recognized in 2020.~~March 31, 2022 and 2021.

Liquidity and Capital Resources

Since our inception, we have funded our operations primarily through collaboration and license agreements, the sale of preferred and common stock, ~~secured loans, and~~ the sale of ~~future royalties.~~royalty interests, and secured loans. Through ~~June 30, 2021,~~March 31, 2022, 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 $1,222.1 million in net proceeds from our initial public offering, follow-on offerings, and the sale of our Class A common stock under the Purchase Agreement, and $299.0 million in net proceeds from the sale of future royalties under the Development Agreement. We have not generated any revenue from the sale of any products. As of ~~June 30, 2021,~~March 31, 2022, we had available cash and cash equivalents of approximately ~~$755.7~~$532.0 million. Our cash and cash equivalents are invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.

Cash Flows

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

2021

2020

(in thousands)

Net cash (used in) provided by:

Operating activities

$
(70,611
)

$
(237,107
)
Investing activities

(462
)

(384
)
Financing activities

8,630

183,586

Net change in cash and cash equivalents

$
(62,443
)

$
(53,905
)

March 31:


	2022			2021
	(in thousands)

Net cash (used in) provided by:
Operating activities	$	(58,185	)	$	(45,011	)
Investing activities		(288	)		(193	)
Financing activities		194			4,678
Net change in cash and cash equivalents	$	(58,279	)	$	(40,526	)

Operating Activities

Net cash used in operating activities was ~~$70.6~~$58.2 million for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, consisting primarily of a net loss of ~~$140.2~~$73.8 million adjusted for non-cash items including stock-based compensation expense of ~~$27.9~~$15.4 million, non-cash interest expense on liability related to sale of future royalty of ~~$22.4~~$9.9 million, and a net decrease in operating assets and liabilities of $10.0 million. The significant items in the change in operating assets that impacted our use of cash in operations include a decrease of $4.5 million in accounts payable due to timing of payments, and a decrease of $8.9 million in direct research and other current and long-term liabilities, primarily due to annual bonus payments.

Net cash used in operating activities was $45.0 million for the three months ended March 31, 2021, consisting primarily of a net loss of $67.5 million adjusted for non-cash items including stock-based compensation expense of $14.7 million, non-cash interest expense on liability related to the sale of future royalties of $10.9 million, depreciation, amortization of issuance costs, ~~and~~ imputed interest expense of ~~$4.0~~$2.0 million, and a net increase in operating assets and liabilities of ~~$15.2~~$5.1 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 and an increase of $3.6 million in accounts payable due to timing of payments, offset by an increase of $5.0 million in prepaid expense, other current assets, and other assets due to insurance premium paid and a decrease of $4.0$9.3 million in accrued direct research and other current and long-term liabilities primarily due to the change in timing of bonus payments from December to March of the following year, which began with the December 2020 payments being delayed to March ~~2021.~~

~~Net cash used in operating activities was $237.1 million for~~2021, and to the ~~six months ended June 30, 2020, consisting primarily~~termination of ~~a net loss~~PAH-related studies and the completion of ~~$116.5 million adjusted for non-cash items including stock-based compensation expense of $34.1 million, loss on extinguishment of debt of $11.2 million, depreciation~~CARDINAL and amortization expense of $4.7 million, and a net increase in operating assets and liabilities of $171.3 million. The significant items in the change in operating assets that impacted our use of cash in operations wereMOXIe clinical trials, offset by an increase in ~~income tax receivable~~accounts payable of ~~$22.2~~$3.6 million ~~and a decrease in payable~~due to ~~collaborators~~timing of ~~$150.0 million for a payment made on June 30, 2020, under the Reacquisition Agreement.~~payments.

Investing Activities

Net cash used in investing activities ~~consisted~~was $0.3 million and $0.2 million for the three months ended March 31, 2022 and 2021, respectively, consisting of purchases of property and equipment. ~~Net cash used in investing activities for the~~ ~~six months ended June 30, 2021 and 2020~~ ~~were not significant.~~

Financing Activities

Net cash provided by financing activities was ~~$8.6~~$0.2 million and $4.7 million for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~primarily~~respectively, consisting of stock options exercises.

Net cash provided by financing activities was $183.6 million for the six months ended June 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 $1.8 million from options exercised, offset by $167.2 million to pay off our Term Loans.31

Operating Capital Requirements

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

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

•

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

•

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

•

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

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

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

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

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

In June 2020, we paid off our Term Loans, 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.

In March 2020, the United States enacted the CARES Act. Under its provisions, we recognized a tax benefit and receivable of $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.

In October 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. The initial annual base rent will be determined based on the project cost, subject to an initial annual cap of approximately $13.3 million, which may increase in certain circumstances. Beginning in the third lease year, the base rent will increase 1.95% per annum each year. In addition to the annual base rent, we will pay for taxes, insurance, utilities, operating expenses, assessments under private covenants, maintenance and repairs, certain capital repairs and replacements, and building management fees.

In October 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 Collaboration Agreement. In exchange for such rights, we will pay AbbVie $330.0 million, of which total payments of $250.0 million have been made as of June 30, 2021, with the remaining $80.0 million 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 basis, of omaveloxolone and an identified list of certain next-generation Nrf2 activators.

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 ~~mid-2024.~~the fourth quarter of 2024. However, we anticipate opportunistically raising additional capital before that time through equity offerings, collaboration or license agreements, additional debt financings, or royalty financings in order to maintain adequate capital reserves. In addition, we may choose to raise additional capital at any time for the further development of our existing product candidates and may also need to raise additional funds sooner to pursue other development activities related to additional product candidates. Decisions about the timing or nature of any financing will be based on, among other things, our perception of our liquidity and of the market opportunity to raise equity, debt, or royalty financing. Additional securities may include common stock, preferred stock, or debt securities. We may explore strategic collaborations or license arrangements for any of our product candidates. If we do explore any arrangements, there can be no assurance that any agreement will be reached, and we may determine to cease exploring a potential transaction for any or all of the assets at any time. If an agreement is reached, there can be no assurance that any such transaction would provide us with a material amount of additional capital ~~resources.~~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~~Recent and continued volatility in 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.~~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, ~~2020.~~2021.

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

•

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

•

the number and characteristics of product candidates that we pursue;

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

the costs associated with being a public company;

•

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

•

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

•

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

•

~~the number and characteristics of product candidates that we pursue;~~

•

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

•

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

•

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

•

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

•

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

•

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

•

~~the costs associated with being a public company;~~

•

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

•

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

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

Contractual Obligations and Commitments

We have various contractual obligations and other commitments that require payments at certain specified periods. The following table summarizes our contractual obligations and commitments as of March 31, 2022 (unaudited):


	Payments due by period
	Less than 1 year		1 to 3 years		4 to 5 years		6 years and beyond		Total
	(unaudited, in thousands)
Operating lease obligations(1)	$	12,633	$	17,448	$	27,831	$	179,687	$	237,599
Total contractual obligations	$	12,633	$	17,448	$	27,831	$	179,687	$	237,599

(1) Above table assumes one year rent abatement is applied beginning in June ~~30, 2021 (unaudited):~~2023 following FDA approval of omaveloxolone.

Payments due by period

Less than
1 year

1 to 3
years

4 to 5
years

6 years and beyond

Total

(unaudited, in thousands)

Operating lease obligations⁽¹⁾

$
2,914

$
16,810

$
27,036

$
166,033

$
212,793

Payable to collaborators

80,000

—

—

—

80,000

Total contractual obligations

$
82,914

$
16,810

$
27,036

$
166,033

$
292,793

~~(1)~~

~~Operating lease obligations include current estimated payments (assuming rent abatement period is applied beginning in 2022) for leases that have not yet commenced, net of lease incentives~~.

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, 4, Liability Related to Sale of Future Royalties, to Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.

Clinical Trials

As of ~~June 30, 2021,~~March 31, 2022, we have several on-going clinical trials in various stages. Under agreements with various CROs and clinical trial sites, we incur expenses related to clinical trials of our product candidates and potential other clinical candidates. The timing and amounts of these disbursements are contingent upon the achievement of certain milestones, patient enrollment, and services rendered or as expenses are incurred by the CROs or clinical trial sites. Therefore, we cannot estimate the potential timing and amount of these payments, and they have been excluded from the table above.

Critical Accounting Policies and Significant Judgments and Estimates

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

Our significant accounting policies are described in Note 2 of Part I, Item 1 of this Quarterly Report on Form 10-Q and in Part I, Item 7, “Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K. There have been no changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Off-Balance Sheet Arrangements

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

Recent Accounting Pronouncements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks in the ordinary course of our business. These market risks are principally limited to interest rate fluctuations. We had cash and cash equivalents of ~~$755.7~~$532.0 million at ~~June 30, 2021,~~March 31, 2022, 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.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of ~~June 30, 2021.~~March 31, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of ~~June 30, 2021,~~March 31, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, during the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

In addition to other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors and other cautionary statements described under the heading “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, which could materially affect our businesses, financial condition, or future results. Additional risks and uncertainties currently unknown to us, or that we currently deem to be immaterial, also may materially adversely affect our business, financial condition, or future results. There have been no material changes in our risk factors from those described in the Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.


Exhibit Number		Description

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

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

10.1*#		Amendment No. 1 to Exclusive License Agreement, dated as of April 5, 2022, by and between the KU Center for Technology Commercialization, Inc. and the Registrant, dated as of, as amended.

10.2*#		Seventh Supplement to Exclusive License and Supply Agreement, dated as of February 28, 2022 between Reata Pharmaceuticals, Inc. and Kyowa Hakko Kirin Co., Ltd.

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

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

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

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

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

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document

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

*	~~Filed herewith.~~

**	~~Furnished herewith.~~

~~SIGNATURES~~* Filed herewith.

** Furnished herewith.

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

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

SIGNATURES

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


Date: ~~August 9, 2021~~May 10, 2022	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

4438


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)


Abbreviated Term		Defined Term
AbbVie		AbbVie Inc.
ADPKD		Autosomal dominant polycystic kidney disease
AEADL		~~Adverse event~~Activities of Daily Living
~~ALS~~AE		~~Amyotrophic lateral sclerosis~~Adverse event
~~ANCOVA~~ALS		~~Analysis of Covariance~~Amyotrophic lateral sclerosis
~~ASC~~ATP		~~Accounting Standards Codification~~Adenosine triphosphate
~~ASU~~bardoxolone		~~Accounting Standards Update~~Bardoxolone methyl
~~ATP~~BXLS		~~Adenosine triphosphate~~
~~Bardoxolone~~		~~Bardoxolone methyl~~
~~BXLS~~		Blackstone Life Sciences, LLC
~~CARES Act~~CKD		~~Coronavirus Aid, Relief, and Economic Security Act~~Chronic kidney disease
~~CKD~~CMC		~~Chronic kidney disease~~Chemistry manufacturing controls
COVID-19		Coronavirus disease
~~CRO~~CRL		~~Contract research organization~~Complete Response Letter
~~DPNP~~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
~~FASB~~FDA		~~Financial Accounting Standards Board~~
~~FDA~~		United States Food and Drug Administration
~~FSGS~~GFR		~~Focal segmental glomerulosclerosis~~Glomerular filtration rate
~~GFR~~Kyowa Kirin		~~Glomerular filtration rate~~
~~IgAN~~		~~IgA nephropathy~~
~~IRS~~		~~Internal Revenue Service~~
~~ITT~~		~~Intent to treat~~
~~KKC~~		Kyowa Kirin Co., Ltd.
~~MAA~~LTIP Plan		~~Marketing Authorization Application~~Second Amended and Restated Long Term Incentive Plan
~~mFARS~~MAA		Marketing Authorization Application
mFARS		Modified Friedreich’s Ataxia Rating Scale
~~MHLW~~NDA		~~Japanese Ministry of Health, Labour and Welfare~~New Drug Application
~~mITT~~PGIC		~~Modified ITT~~Patient global impression of change
~~NDA~~PK		~~New Drug Application~~Pharmacokinetic
~~PDUFA~~Registrational trial		~~Prescription Drug User Fee Act~~
PK		~~Pharmacokinetic~~
~~Registrational trial~~		An adequate and well-controlled trial designed to be sufficient to apply for regulatory approval of a drug candidate, although notwithstanding the Company’s design a regulatory agency may determine that further clinical studies or data are required
~~REMS~~RSU		~~Risk Evaluation and Mitigation Strategies~~Restricted Stock Unit
~~RSU~~SAE		~~Restricted Stock Unit~~
~~SAE~~		Serious adverse event
~~SAP~~		~~Statistical analysis plan~~

~~Abbreviated Term~~		~~Defined Term~~
SEC		U.S. Securities and Exchange Commission
~~T1D CKD~~U.S. GAAP		~~Type 1 diabetic CKD~~
~~T2D CKD~~		~~Type 2 diabetic CKD~~
~~UACR~~		~~Urinary albumin-to-creatinine ratio~~Accounting principles generally accepted in the United States


	June 30, 2021			December 31, 2020			March 31, 2022			December 31, 2021
	(unaudited)						(unaudited)
Assets
Cash and cash equivalents	$	755,707		$	818,150		$	531,979		$	590,258
Prepaid expenses and other current assets		11,971			6,960			5,357			6,217
Income tax receivable		—			22,228
Total current assets		767,678			847,338			537,336			596,475
Property and equipment, net		6,005			4,912			11,202			11,604
Operating lease right-of-use-assets								131,178			126,777
Other assets		3,929			5,348			152			160
Total assets	$	777,612		$	857,598		$	679,868		$	735,016
Liabilities and stockholders’ equity
Accounts payable		8,412			4,790			9,015			13,505
Accrued direct research liabilities		15,695			14,023			14,930			14,249
Other current liabilities		16,983			22,264			13,778			21,450
Payable to collaborators		76,923			73,437
Operating lease liabilities, current								5,142			3,142
Deferred revenue		3,090			4,688			755			1,648
Total current liabilities		121,103			119,202			43,620			53,994
Other long-term liabilities		4,872			5,511			5			0
Operating lease liabilities, noncurrent								136,445			132,891
Liability related to sale of future royalties, net		337,808			315,454			372,013			362,142
Total noncurrent liabilities		342,680			320,965			508,463			495,033
Commitments and contingencies
Stockholders’ equity:
Common stock A, $0.001 par value: 500,000,000 shares authorized; issued and outstanding – 31,454,329 and 31,109,154 at June 30, 2021 and December 31, 2020, respectively		31			31
Common stock B, $0.001 par value: 150,000,000 shares authorized; issued and outstanding – 4,924,479 and 5,044,931 at June 30, 2021 and December 31, 2020, respectively		5			5
Common stock A, $0.001 par value: 500,000,000 shares authorized; issued and outstanding – 31,525,514 and 31,478,197 at March 31, 2022 and December 31, 2021, respectively								31			31
Common stock B, $0.001 par value: 150,000,000 shares authorized; issued and outstanding – 4,919,249 and 4,919,249 at March 31, 2022 and December 31, 2021, respectively								5			5
Additional paid-in capital		1,412,193			1,375,640			1,457,222			1,441,584
Accumulated deficit		(1,098,400	)		(958,245	)		(1,329,473	)		(1,255,631	)
Total stockholders’ equity		313,829			417,431			127,785			185,989
Total liabilities and stockholders’ equity	$	777,612		$	857,598		$	679,868		$	735,016


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


-
		Page
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		1
DEFINED TERMS		3
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	54
	Consolidated Balance Sheets	54
	Consolidated Statements of Operations	65
	Consolidated Statements of Stockholders’ Equity (Deficit)	76
	Consolidated Statements of Cash Flows	87
	Notes to Unaudited Consolidated Financial Statements	98
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1716
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4135
Item 4.	Controls and Procedures	4135
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	4236
Item 1A.	Risk Factors	4236
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4236
Item 3.	Defaults Upon Senior Securities	4236
Item 4.	Mine Safety Disclosures	4236
Item 5.	Other Information	4236
Item 6.	Exhibits	4337
Signatures		44
		38

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

	Six Months Ended June 30, 2021
	Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’			Three Months Ended March 31, 2022
	Shares		Amount		Shares			Amount		Capital		Deficit			Equity			Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’
Balance at December 31, 2020		31,109,154	$	31		5,044,931		$	5	$	1,375,640	$	(958,245	)	$	417,431
																		Shares		Amount		Shares			Amount		Capital		Deficit			Equity
Balance at December 31, 2021																			31,478,197	$	31		4,919,249		$	5	$	1,441,584	$	(1,255,631	)	$	185,989
Net loss		—		—		—			—		—		(140,155	)		(140,155	)		—		—		—			—		—		(73,842	)		(73,842	)
Compensation expense related to stock options		—		—		—			—		27,923		—			27,923			—		—		—			—		15,444		—			15,444
Exercise of options		—		—		219,241			—		8,630		—			8,630			—		—		9,375			—		194		—			194
Issuance of common stock upon vesting of restricted stock units		—		—		5,482			—		—		—			—			35,107		—		2,835			—		—		—			—
Conversion of common stock Class B to Class A		345,175		—		(345,175	)		—		—		—			—			12,210		—		(12,210	)		—		—		—			—
Balance at June 30, 2021		31,454,329	$	31		4,924,479		$	5	$	1,412,193	$	(1,098,400	)	$	313,829
Balance at March 31, 2022																			31,525,514	$	31		4,919,249		$	5	$	1,457,222	$	(1,329,473	)	$	127,785

	Three Months Ended June 30, 2020
	Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital		Deficit			Equity
Balance at March 31, 2020		28,166,652	$	28		5,070,271		$	5	$	988,046	$	(759,432	)	$	228,647
Net loss		—		—		—			—		—		(67,581	)		(67,581	)
Compensation expense related to stock options		—		—		—			—		14,796		—			14,796
Exercise of options		—		—		7,135			—		365		—			365
Conversion of common stock Class B to Class A		19,087		—		(19,087	)		—		—		—			—
Issuance of Common Stock		340,793		1		—			—		55,399		—			55,400
Balance at June 30, 2020		28,526,532	$	29		5,058,319		$	5	$	1,058,606	$	(827,013	)	$	231,627

	Six Months Ended June 30, 2020
	Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’			Three Months Ended March 31, 2021
	Shares		Amount		Shares			Amount		Capital		Deficit			Equity			Common Stock A				Common Stock B						Additional Paid-In		Total Accumulated			Total Stockholders’
Balance at December 31, 2019		27,878,550	$	28		5,318,157		$	5	$	967,317	$	(710,493	)	$	256,857
																		Shares		Amount		Shares				Amount		Capital		Deficit			Equity
Balance at December 31, 2020																			31,109,154	$	31		5,044,931			$	5	$	1,375,640	$	(958,245	)	$	417,431
Net loss		—		—		—			—		—		(116,520	)		(116,520	)		—		—		—				—		—		(67,455	)		(67,455	)
Compensation expense related to stock options		—		—		—			—		34,104		—			34,104			—		—		—		��		—		14,679		—			14,679
Exercise of options		—		—		47,351			—		1,786		—			1,786			—		—		112,423				—		4,678		—			4,678
Issuance of common stock upon vesting of restricted stock units																							3,302
Conversion of common stock Class B to Class A		307,189		—		(307,189	)		—		—		—			—			251,102		—		(251,102	)			—		—		—			—
Issuance of Common Stock		340,793		1		—					55,399					55,400
Balance at June 30, 2020		28,526,532	$	29		5,058,319		$	5	$	1,058,606	$	(827,013	)	$	231,627
Balance at March 31, 2021																			31,360,256	$	31		4,909,554			$	5	$	1,394,997	$	(1,025,700	)	$	369,333

		As of June 30,
	Balance Sheet Classification	2021			2020
		(in thousands, except for years and %)
Non-current right-of-use assets	Other assets	$	3,796		$	7,653
Current lease liabilities	Other current liabilities	$	2,970		$	3,452
Non-current lease liabilities	Other long-term liabilities	$	962		$	5,212

Weighted-average remaining lease term (in years)			1.3			2.3
Weighted-average discount rate			8.1	%		9.6	%

	As of June 30, 2021
	(in thousands)
2021 (remaining six months)	$	1,585
2022		2,570
Total lease payments		4,155
Less: Imputed interest		(223	)
Present value of lease liabilities	$	3,932

Mean eGFR Change from Baseline (mL/min/1.73 m²)	Placebo ITT	Bardoxolone Methyl
Mean eGFR Change from Baseline (mL/min/1.73 m²)	Placebo ITT	ITT	mITT	Goal Dose	Below Goal Dose
Week 100 – Week 64	-3.34	-3.06	-2.30	0.17	-3.18
Week 100 CFB difference between treatment groups	-	7.65	11.29	16.77	7.14

Year 2 (Week 104)	Days Post-Dose
Change from Baseline in eGFR (mL/min/1.73 m²)	≥14 to <21 Days	≥21 to <28 Days	≥28 to <35 Days	≥35 Days
N	1	20	27	8
Mean (SD)	-3.80	-4.25 (16.2)	-4.37 (10.5)	-0.18 (13.1)
Median	-3.8	-2.3	-5.4	-2.1