UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 20172019

OR

For the transition period from         to          

Commission File Number 001-37785

Reata Pharmaceuticals, Inc.

(Exact name of Registrant as specified in its Charter)

Registrant’s telephone number, including area code: (972) 865-2219

Securities registered pursuant to Section 12(b) of the Act: Class A Common Stock, Par Value $0.001 Per Share; listed on The

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES  ☐☒    NO  ☒☐

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    YES  ☐    NO  ☒

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    YES ☒    NO  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

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  ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of Class A Common Stock on The NASDAQNasdaq Stock Market on June 30, 2017,2019, was $317,047,608.$1,955,969,284.

The number of shares of Registrant’s Common Stock outstanding as of February 28, 201813, 2020 was 19,990,92927,911,518 shares of Class A Common Stock and 6,164,2695,317,695 shares of Class B Common Stock.

Portions of the Registrant’s Definitive Proxy Statement relating to the Annual Meeting of Shareholders,Stockholders, scheduled to be held on June 13, 2018,10, 2020, are incorporated by reference into Part III of this Report.

Table of Contents

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SPECIALCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements withinthat involve substantial risks and uncertainties.  We make such forward-looking statements pursuant to the meaningsafe harbor provisions of the Private Securities Litigation Reform Act of 1995 (PSLRA) with the intention of obtaining the benefits of the “safe harbor” provisions of the PSLRA.and other federal securities laws.  In this Annual Report on Form 10-K, 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:

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These risks are not exhaustive.  Other sections of this Annual Report on Form 10-K include additional factors that could adversely affect our business and financial performance.  Moreover, we operate in a very competitive and rapidly changing environment.  New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the effects of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements.  Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part I, Item 1A. Risk Factors and elsewhere in this Annual Report on Form 10-K.  Given these uncertainties, you should not place undue reliance on these forward-looking statements.

The forward-looking statements made in this Annual Report on Form 10-K are based on circumstances as of the date on which the statements are made.  Except as required by law, we undertake no obligation to update or revise these forward-looking statements for any reason, whether as a result of new information, future events, or otherwise, or to conform these statements to actual results or to changes in our expectations.

This Annual Report on Form 10-K also contains estimates, projections, and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets and the incidence and prevalence of certain medical conditions.  Information that is based on estimates, forecasts, projections, market research, or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances reflected in this information.  Unless otherwise expressly stated, we obtained this industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical, and general publications, government data, and similar sources.

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DEFINED TERMS

Unless the context requires otherwise, references to “Reata,” “the Company,” “we,” “us,” or “our” in this 2019 Form 10-K refer to Reata Pharmaceuticals, Inc. and its subsidiaries.  We also have used several other terms in this 2019 Form 10-K, most of which are explained or defined below.

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PART I

Item 1. Business.

Overview

We are a clinical stageclinical-stage biopharmaceutical company focused on identifying, developing, and commercializing innovative therapies that change patients’ lives for the better.  We concentrate on small-molecule therapeutics to address serious andwith novel mechanisms of action for the treatment of severe, life-threatening diseases with few or no approved therapies by targeting molecular pathways that regulate cellular metabolismtherapies.  Our lead programs are in rare forms of chronic kidney disease (CKD) and inflammation.a rare neurological disease.  We are currently conducting threerecently announced positive topline data from registrational trials withstudies for both of our lead product candidates, bardoxolone methyl (bardoxolone) in patients with CKD caused by Alport syndrome and omaveloxolone whichin patients with a neurological disorder called Friedreich’s ataxia (FA).  Both bardoxolone and omaveloxolone activate the transcription factor Nrf2 to restorenormalize mitochondrial function, reducerestore redox balance, and resolve inflammation.  Because mitochondrial dysfunction, oxidative stress, and resolve inflammation.  Our lead registrational programsinflammation are evaluatingfeatures of many diseases, we believe bardoxolone and omaveloxolone have many potential clinical applications.  We possess exclusive, worldwide rights to develop, manufacture, and commercialize bardoxolone, omaveloxolone, and our product candidatesnext-generation Nrf2 activators, excluding certain Asian markets for the treatment of a rare form of chronic kidney disease (CKD) caused by Alport syndrome, a rare form of degenerative neuromuscular disease called Friedreich’s ataxia (FA)bardoxolone in certain indications, which are licensed to Kyowa Kirin Co., and a rare and severe form of pulmonary arterial hypertension associated with connective tissue disease (CTD-PAH)Ltd. (KKC).

Programs in Chronic Kidney Disease

We are developing bardoxolone methyl for the treatment of patients with CKD caused by Alport syndrome, autosomal dominant polycystic kidney disease (ADPKD), and four additionalother rare forms of CKD that, in the aggregate, affect more than half a million700,000 patients in the United States.  CKD is characterized by a progressive worsening in the rate at which the kidney filters waste products from the blood, called the glomerular filtration rate (GFR).  When GFR gets too low, patients develop end stage renal disease (ESRD) and require dialysis or a kidney transplant to survive.  In 11 clinical trials, bardoxolone methyl has been shown to consistently improve kidney function, as assessed by estimated GFR (eGFR) in patients with a variety of diseases that result in decreased kidney function.  We believe that bardoxolone methyl treatment has the potential to delay or prevent GFR declines that cause the need for dialysis or a transplant in patients with Alport syndrome and other rare forms of CKD.  

We are conducting a Phase 2/3 trial called CARDINAL, which is an international, multi-center, randomized, double-blind, placebo-controlled trial in the Phase 3 portion, that studies the safety and efficacy of bardoxolone methyl 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 (GBM) in the kidney.  Alport syndrome patients experience a progressive worsening of the kidney’s capacity to filter waste products out of the blood, which can lead to end-stage kidney disease (ESKD) and serious hereditary disease with no approved therapies thatthe need for chronic dialysis treatment or a kidney transplant.  Alport syndrome affects both children and adults. Patients with Alport syndrome experience annual declines in kidney function and, inIn patients with the most severe forms of the disease, approximately 50% progress to dialysis by age of 25, 90% by age 40, and nearly 100% by age 60.  Last year,According to the Alport Syndrome Foundation, Alport syndrome affects approximately 30,000 to 60,000 people in the United States.  There are currently no approved therapies to treat CKD caused by Alport syndrome.

In November 2019, we reported the primary endpoint data for the open label, Phase 2 portion of CARDINAL.  In the Phase 2 portion, bardoxolone methyl demonstrated a statistically significant, mean increase from baseline in eGFR in 30 patients after 12 weeks of treatment.  All patients had an increase in eGFR, and these increases in eGFR translated to an improvement in CKD stage for approximately 73% of patients.  

Based on these results, we began enrollingannounced that the Phase 3 portion of the CARDINAL last year.  Thestudy of bardoxolone in patients with CKD caused by Alport syndrome met its primary and key secondary Year 1 endpoints.  After 48 weeks of treatment, patients treated with bardoxolone had a statistically significant improvement compared to placebo in mean estimated glomerular filtration rate (eGFR) of 9.50 mL/min/1.73 m² (p<0.0001).  At Week 52, patients treated with bardoxolone had a statistically significant improvement compared to placebo in mean retained eGFR, which is the eGFR change after a four-week withdrawal of drug, of 5.14 mL/min/1.73 m² (p=0.0012).  After 52 weeks, patients in the placebo arm of CARDINAL lost an average of 6.1 mL/min/1.73 m².  Based on these positive results, and subject to discussions with regulatory authorities, we plan to proceed with the submission of regulatory filings this year for marketing approval in the United States.

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

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In a Phase 2 study called PHOENIX, bardoxolone demonstrated a statistically significant increase from baseline of 9.3 mL/min/1.73 m² in mean eGFR after 12 weeks of treatment in 31 patients with ADPKD.  Available historical data for 29 of these patients showed an average annual decline in eGFR of 4.8 mL/min/1.73 m² in the three-year period prior to study entry.  In May 2019, we began enrollment in FALCON, an international, multi-center, randomized, double-blind, placebo-controlled Phase 3 studytrial studying the safety and efficacy of bardoxolone in approximately 300 patients with ADPKD. The trial will enroll approximately 150a broad range of patients randomized evenlyfrom 18 to either bardoxolone methyl or placebo.  70 years old with an eGFR between 30 to 90 mL/min/1.73 m².The U.S.United States Food and Drug Administration (FDA) has provided us with written guidance that, in patients with CKD caused by Alport syndrome,ADPKD, an analysis of retained eGFR which is the eGFR change after a four week withdrawal of drug, demonstrating an improvement versus placebo after one year of bardoxolone methyl treatment may support accelerated approval. In addition, data demonstratingapproval, and an improvement versus placebo in retained eGFR after two years of treatment may support full approval.

Three additional rare forms of CKD were studied in PHOENIX, including IgA nephropathy (IgAN), type 1 diabetic CKD (T1D CKD), and focal segmental glomerulosclerosis (FSGS).  In each of these Phase 2 cohorts, bardoxolone demonstrated a statistically significant increase from baseline in mean eGFR after 12 weeks of treatment. We expectbelieve that clinical trials similar to have one year top-line results fromthe design of the Phase 3 portionCARDINAL and FALCON trials with a two-year duration and a retained eGFR benefit endpoint after one and two years of CARDINAL available in the second half of 2019.  If successful, we believe the results from the Phase 3 portion of CARDINAL, together with other data from our development program, willtreatment may be sufficient to form the basisacceptable for submission of a New Drug Application (NDA) submissionfor these forms of CKD to the FDA.  We plan to pursue each of these rare and serious forms of CKD as commercial indications.

The FDA seeking approval ofhas granted orphan drug designation to bardoxolone methyl for the treatment of CKD caused byAlport syndrome and ADPKD, and the European Commission has granted orphan drug designation to bardoxolone for the treatment of Alport syndrome.

Programs in Neurological Diseases

We are developing omaveloxolone for the treatment of patients with FA, an inherited, debilitating, and degenerative neuromuscular disorder caused by mutations in the gene for frataxin, a mitochondrial protein.that is typically diagnosed during adolescence and can ultimately lead to premature death.  Patients with FA are typically dependent onexperience progressive loss of coordination, muscle weakness, and fatigue, which commonly progresses to motor incapacitation and wheelchair use 10 to 15 years after disease onset,reliance.  Symptoms generally occur in children, with patients requiring a wheelchair by their teens or early 20s.  FA affects approximately 5,000 children and their median age of death isadults in the mid-30s.United States and 22,000 individuals globally.  There are currently no currently approved therapies for the treatment ofto treat FA.  Omaveloxolone is being studied in

In October 2019, we announced that the registrational part 2 portion of ourthe MOXIe trial.  In part 1Phase 2 trial of MOXIe, at the optimal dose level, omaveloxolone in patients with FA met its primary endpoint of change in modified Friedreich’s Ataxia Rating Scale (mFARS) relative to placebo after 48 weeks of treatment.  Patients treated with omaveloxolone (150 mg/day) demonstrated a statistically significant, placebo-corrected 2.40 point mean improvement in modified Friedreich’s Ataxia Rating Scale (mFARS) scores of 3.8 points (p=0.0001) versus baseline and a placebo-corrected improvement(decrease) in mFARS scoresafter 48 weeks of 2.3 pointstreatment (p=0.06)0.014).  We expectOmaveloxolone treatment was generally reported to have top-line data frombe well-tolerated.  Based on these positive results, and subject to discussions with regulatory authorities, we plan to proceed with the MOXIe trial in the second halfsubmission of 2019.  If successful, we believe the results from the MOXIe clinical trial, together with other data from the omaveloxolone program, will be sufficient to form the basis of an NDA submission to the FDA seekingregulatory filings this year for marketing approval of omaveloxolone for the treatment of FA in the United States.  The FDA and the European Commission have granted orphan drug designation to omaveloxolone for the treatment of FA.

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

We are studyingalso developing RTA 901 in neurological indications.  RTA 901 is the lead product candidate from our Hsp90 modulator program.  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.  We have completed a Phase 1 trial to evaluate the safety, tolerability, and pharmacokinetic profile of RTA 901 administered orally, once-daily in healthy adult volunteers, and no safety or tolerability concerns were reported. We plan to continue development for RTA 901 in neurological diseases, such as diabetic neuropathy. We are the exclusive licensee of RTA 901 and have worldwide commercial rights.

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Other Clinical Programs

In addition to our lead programs in rare forms of CKD and a rare neurological disease, we are exploring additional clinical and preclinical programs.  Our most advanced program outside of CKD and neurological diseases is the registrational Phase 3 CATALYST study of bardoxolone methyl in CTD-PAH, whichpulmonary arterial hypertension (PAH) caused by connective tissue disease (CTD-PAH).  CTD-PAH is a rare, serious, and progressive disease that leads to heart failure and death.  CTD-PAH patients are less responsive to existing vasodilator therapies than patients with the more common, idiopathic form of PAH (I-PAH) and have a worse prognosis.  Bardoxolone methyl is being studied for the treatment of CTD-PAH in the Phase 3 CATALYST trial.  We initiated CATALYST following review of initial data from our

In a Phase 2 clinical trial in patients with PAH called LARIAT, whichbardoxolone demonstrated a statistically significant, mean time-averaged increase in mean 6-minute walk distance (6MWD) at 16 weeks in CTD-PAH patients compared to baseline.  We currently expect to have top-line data from the CATALYST trial in the second half of 2018.  However, the trial is designed to enroll between 130 and 200 patients, and the final sample size will be determined by a pre-specified, blinded sample size re-calculation based on 6MWD variability and baseline characteristics.  The timing of data availability may change if the sample size is increased due to the sample size re-calculation.  If successful, we believe the results from the CATALYST trial, together with other data from the bardoxolone methyl development program, will be sufficient to form the basis of an NDA submission to the FDA seeking approval of bardoxolone methyl for the treatment of CTD-PAH.

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In addition to our three registrational programs, we are currently conducting a battery of additional clinical and preclinical programs in serious and life-threatening diseases that may provide expansion opportunities for our drug candidates.  We plan to evaluate data from these earlier stage programs to determine which indications to advance into later stage trials.

Our Strategy

Our goal is to become a leader in the discovery, development, and commercialization of small molecule therapies for the treatment of severe and life-threatening diseases.  We seek to identify and select, for development and commercialization, small molecules with novel mechanisms of action that we believe have biological properties with broad applicability.  Once we have selected a class of small molecules, we apply their biological properties to clinical settings with unmet needs, and we triage opportunities based on development timeline and cost, regulatory pathway, and commercial opportunity.  After identifying suitable molecules for clinical development, we mitigate development risk by maintaining a diversified and broad clinical pipeline, rapidly analyzing data to determine the potential of each program, and entering into development collaborations with industry-leading collaborators.  Our strategy includes the following key components:

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Our Lead Programs

The chart below is a summary of our current registrational programs:

¹ The trial will enroll between 130 and 200 patients, with the final sample size determined by a pre-specified, blinded sample size re-calculation based on 6MWD variability and baseline characteristics.  If the final sample size is at the high end of the enrollment target, the timing of data release may change.

Foundational Biology of Our Nrf2 Activators

The foundational biology of Nrf2 activation underlies our two lead product candidates, bardoxolone methyl and omaveloxolone.  Nrf2 activators bind to Keap1, a protein that coordinates the cellular response to reactive oxygen species (ROS) and other stimuli.  Binding to Keap1 activates Nrf2, a transcription factor that evolved to orchestrate the resolution of inflammation.  Nrf2 coordinates this process by normalizing metabolism and increasing mitochondrial energy production (ATP), increasing cellular antioxidant capacity, and reducing production of ROS.  This activity inhibits inflammatory signaling pathways, such as NF-κB and the inflammasome.  

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Abnormal metabolism, decreased ATP levels, increased ROS production, and chronic inflammatory signaling are common features of a variety of diseases.  When left unresolved, these pathologic processes can lead to abnormal cellular proliferation, tissue fibrosis and remodeling, and organ damage.  By correcting the underlying molecular aberrations, Nrf2 activators may have the potential to prevent these longer-term consequences and improve disease symptoms.  Since mitochondrial dysfunction, oxidative stress, and inflammation are features of many diseases, Nrf2 activators may have many potential clinical applications and have been the subject of more than 200 peer-reviewed scientific papers.

Bardoxolone Methyl for the Treatment of Rare Chronic Kidney Diseases

Overview

We are developing bardoxolone methyl for the treatment of patients with CKD caused by Alport syndrome and four additional rare forms of CKD that, in the aggregate, affect more than half a million patients in the United States.  CKD is characterized by a progressive worsening in the rate at which the kidney filters waste products from the blood, called GFR.  When GFR gets too low, patients develop ESRD and require dialysis or a kidney transplant to survive.  Dialysis increases the likelihood of serious and life-threatening complications, such as cardiovascular disease, and the five-year survival rate for hemodialysis patients is only approximately 40%.  The number of patients with ESRD in the United States has nearly doubled in the last two decades with an estimated 700,000 patients as of 2015.  Approximately 30% of these patients suffer from a rare form of CKD.  There are no approved therapies in the United States for Alport syndrome or the four additional rare forms of CKD addressed by our program.

We believe that bardoxolone methyl treatment has the potential to delay or prevent the loss of kidney function that causes the need for dialysis or a transplant in patients with Alport syndrome and other rare forms of CKD.  In 11 clinical trials, bardoxolone methyl has been shown to consistently improve kidney function, as assessed by eGFR in patients with a variety of diseases that result in decreased kidney function.  eGFR is an estimate of the kidney’s filtration rate that is used to track the decline in kidney function and progression to ESRD.  In addition to eGFR improvements, bardoxolone methyl treatment has been shown to significantly increase directly-measured GFR using the “gold standard” inulin clearance method and has been shown to reduce the levels of blood waste products filtered by the kidney.  Further, kidney function improvements from bardoxolone methyl treatment are sustained in long term trials.  In two large, international, placebo-controlled clinical studies in patients with CKD caused by type 2 diabetes, BEAM and BEACON, bardoxolone methyl treatment produced sustained increases in eGFR for at least one year.  In BEACON, patients that received bardoxolone methyl treatment were more than 50% less likely than patients receiving placebo to experience events that predict kidney failure.  In PAH patients in LARIAT, eGFR improvements from bardoxolone methyl treatment were durable for two years.  Importantly, in BEAM and BEACON, bardoxolone methyl treatment for one year produced a retained eGFR benefit after the drug was withdrawn.  This retained eGFR benefit provides additional evidence that bardoxolone methyl treatment may protect the structure of the kidney and may prevent or delay the need for dialysis or a transplant.

The FDA has provided us with guidance that, in patients with CKD caused by Alport syndrome, data demonstrating an improvement versus placebo in retained eGFR after one year of bardoxolone methyl treatment may support accelerated approval, and data demonstrating an improvement versus placebo in retained eGFR after two years of treatment may support full approval.  Based on this guidance, we are conducting a Phase 2/3 trial called CARDINAL in patients with a severe, genetic form of CKD caused by Alport syndrome, and we expect data from the study to be available during the second half of 2019.  Alport syndrome is a rare and serious hereditary disease with no approved therapies that affects both children and adults.  Patients with Alport syndrome experience progressive loss of kidney function and, in patients with the most severe forms of the disease, approximately 50% progress to dialysis by age of 25, 90% by age 40, and nearly 100% by age 60.  

CARDINAL, which is an international, multi-center, randomized, double-blind, placebo-controlled trial in the Phase 3 portion, studiesstudying the safety and efficacy of bardoxolone methyl in CTD-PAH patients randomized one-to-one to active drug or placebo.  We completed the enrollment of CATALYST and expect to have top-line data in mid-2020.  Based on discussions with CKD caused by Alport syndrome.  Last year, we reportedthe FDA, the primary endpoint data forof CATALYST is the open label, Phase 2 portion of CARDINAL.  In the Phase 2 portion, bardoxolone methyl demonstrated a statistically significant, mean increasechange from baseline in eGFR of 13.4 mL/min/1.73 m² (p<0.000000001) in 30 patients6MWD compared to placebo after 1224 weeks of treatment.  All patients had an increase in eGFR from baseline, and these increases in eGFR translated to an improvement in CKD stage for approximately 73% of patients.  Patients in the Phase 2 portion of CARDINAL will continue study drug for two years, and retained eGFR will be assessed after both one and two years of treatment.  We expect to have one year retained eGFR data from the Phase 2 portion of CARDINAL in the third quarter of 2018.  

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Because we observed a statistically significant increase in eGFR after 12 weeks of treatment in the Phase 2 portion of CARDINAL, we began enrolling the Phase 3 portion of CARDINAL last year.  The Phase 3 study will enroll approximately 150 patients randomized evenly to either bardoxolone methyl or placebo.  We will measure on-treatment eGFR at 48 weeks and the retained eGFR at 52 weeks.  After 52 weeks, patients will be restarted on study drug with their original treatment assignments and will continue on study drug for a second year.  The second year on-treatment eGFR will be measured after 100 weeks and the retained eGFR will be measured at Week 104.  We expect to have one year top-line results from the Phase 3 portion of CARDINAL available in the second half of 2019.  If successful,positive, we believe that the results from the Phase 3 portion of CARDINAL,CATALYST, together with other data from our development program, will be sufficient to form the basis of an NDA submission to the FDA seeking approval for bardoxolone methyl in the United States.

Because we believe the mechanism of action of bardoxolone methyl addresses a final common pathwayfor the treatment of kidney function loss, and because we have observed significant increases in eGFR in patients with declining kidney function from a varietyCTD-PAH.  The FDA has granted orphan drug designation to bardoxolone for the treatment of diseases,PAH.

In addition, we are conducting an additional clinical study to assess whether bardoxolone methyldeveloping RTA 1701, the lead product candidate from our proprietary series of RORγt inhibitors, for the potential treatment can increase kidney function, as assessed by eGFR, in patients with four additional rare forms of CKD.  PHOENIX is an open-label, multi-centera broad range of autoimmune, inflammatory, and fibrotic diseases.  We have completed a Phase 21 trial to evaluate the safety, tolerability, and efficacypharmacokinetic profile of RTA 1701 in healthy adult volunteers.  No safety or tolerability concerns were reported, and we observed an acceptable pharmacokinetic profile. We plan to continue development for RTA 1701 in autoimmune, inflammatory, or fibrotic diseases. We retain all rights to our RORγt inhibitors, which are not subject to any existing commercial collaborations.

2019 Key Developments

On February 20, we reported positive, final results from the FSGS cohort of PHOENIX, a Phase 2 study of bardoxolone methyl in patients with autosomal dominant polycystic kidney disease (ADPKD), IgA nephropathy, type 1 diabetic CKD, or focal segmental glomerulosclerosis (FSGS).  We plan to enroll approximately 25 patients of each of these rare forms of CKDCKD.

On May 30, we announced the enrollment of the first patient in PHOENIX and to evaluate the effectPhase 3 FALCON trial of bardoxolone methylin patients with ADPKD.

On June 5, we announced the FDA granted orphan drug designation to bardoxolone for the treatment on eGFR at 12 weeks.  We have enrolled patients in PHOENIX from eachof ADPKD.

On August 28, we announced the appointment of Manmeet S. Soni as CFO and Executive Vice President.

On October 9, we reacquired development, manufacturing, and commercialization rights concerning our proprietary Nrf2 activator product platform originally licensed to AbbVie Inc. (AbbVie) for territories outside of the fourUnited States with respect to bardoxolone and worldwide with respect to omaveloxolone and certain next-generation Nrf2 activators.

On October 9, we amended our loan and security agreement with Oxford Finance LLC and Silicon Valley Bank to increase our loan to $75.0 million (the Amended Restated Loan Agreement), which was drawn in December.

On October 14, we reported positive topline data from the pivotal MOXIe study of omaveloxolone in patients with FA.

On November 7, preclinical data presented at the American Society of Nephrology annual meeting by Dr. Naoki Kashihara elucidated that activation of the Nrf2 pathway increases GFR by increasing effective glomerular filtration area, providing insight into bardoxolone’s mechanism of action in CKD.

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On November 12, we reported positive, topline one-year data from the pivotal CARDINAL study of bardoxolone in patients with CKD caused by Alport syndrome.

On November 18, we announced the closing of an underwritten public offering of 2,760,000 shares of Class A common stock at a price to the public of $183.00 per share. We received gross proceeds from the offering, before deducting underwriting discounts and commissions and other offering expenses, of approximately $505.1 million.

Our Strategy

Our goal is to be a leader in the discovery, development, and commercialization of small-molecule therapies for the treatment of severe and life-threatening diseases.  Our strategy includes the following key components:

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Our Programs

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Foundational Biology of Our Nrf2 Activators

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Chronic, unresolved inflammation and impaired cellular metabolism are key features of many diseases.  Inflammation is an integral component of the normal immune response that occurs when cells encounter harmful stimuli, such as invading pathogens, damaged cells, or irritants.  During inflammation, cells activate inflammatory processes and complexes that increase the production of cytokines, which are proteins that recruit and activate immune cells.

Inflammation and mitochondrial metabolism are closely associated.  The mitochondria are often called the “powerhouses” of the cell as they produce the energy that the cell needs to function.  This energy is produced by converting fatty acids and glucose into ATP by a process called oxidative phosphorylation.  During inflammation, mitochondrial metabolism is temporarily reprogrammed to suppress oxidative phosphorylation. Instead of primarily making ATP, the mitochondria divert fatty acids and glucose to increase the production of pro-inflammatory mediators.  During this reprogramming, the mitochondria release ROS that can directly attack pathogens and amplify the production of cytokines.

In a normal immune response, the resolution of inflammation begins after the harmful stimuli have been eliminated.  Nrf2 is a protein that plays a key role in the resolution of inflammation by regulating the expression of specific genes involved in mitochondrial metabolism, redox balance, and cytokine production.  When activated, Nrf2 promotes the resolution of inflammation by normalizing mitochondrial metabolism, restoring redox balance, and suppressing cytokine production.  In many chronic and genetic diseases, Nrf2 activity is suppressed, and the resolution of inflammation fails to occur or is inadequate, leading to persistent mitochondrial dysfunction, excess production of ROS, and production of cytokines.  These processes cause chronic inflammation, which can ultimately lead to tissue damage and loss of organ function.  

Bardoxolone and omaveloxolone are Nrf2 activators that selectively bind to Keap1, a protein that governs the activity of Nrf2 in response to cellular stress.  By binding to Keap1, bardoxolone and omaveloxolone stabilize Nrf2 and increase its activity.  Since mitochondrial dysfunction, oxidative stress, and inflammation are features of many diseases, Nrf2 activators, such as bardoxolone and omaveloxolone, may have many potential clinical applications.  Bardoxolone and omaveloxolone have been extensively studied by many investigators.  Their tissue-protective and therapeutic effects have been observed in many preclinical models and are associated with meaningful improvements in hallmarks of disease progression, such as inflammation, tissue remodeling, and fibrosis.  Our Nrf2 activators are the subject of over 400 peer-reviewed publications and have been studied in over 50 preclinical animal models in which they have demonstrated anti-inflammatory, tissue-protective, or anti-fibrotic effects in the kidney, heart, brain, liver, lungs, vasculature, fat tissue, pancreas, bone marrow, intestines, eyes, spinal cord, prostate, inner ear, and skin.

Programs in CKD

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

In addition, KKC, our strategic collaborator in CKD, is currently conducting its registrational trial of bardoxolone in diabetic (type 1 and expect2) CKD in Japan.  KKC completed patient enrollment in this trial in June 2019 and expects to have topline data from one or more ofin the four cohorts available during the secondfirst half of 2018.2022.

Background on Rare Forms of CKD, eGFR, and the Burden of ESRDESKD and Dialysis

CKD is characterized by a progressive lossworsening in the rate at which the kidney is filteringfilters waste products from the blood, called GFR.  CKD typically results from diabetic complications, hypertension, obesity, genetic defects, or autoimmunity.  The initiating eventsthe glomerular filtration rate (GFR).  eGFR is an estimate of GFR that promote CKD can be quite different, but a substantial body of evidence has emerged that chronic inflammation is a common underlying feature for most formsnephrologists use to track the decline in kidney function and progression of CKD.  When GFR gets too low, patients develop ESKD and require dialysis or a kidney transplant to survive.  

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Declining kidney function leads to the buildup of high levels of waste products in the blood that causes the patient to suffer symptoms, such as nausea and fatigue, and to develop complications including high blood pressure, anemia, weak bones, poor nutritional health, and nerve damage. eGFR is an estimate of GFR that nephrologists use to track the decline in kidney function and progression of CKD.  Normal individuals have an eGFR of approximately 120 mL/min/1.73 m².  When eGFR declines to approximately 15 mL/min/1.73 m², or below, patients generally develop ESRDESKD and require dialysis or a kidney transplant to survive.  

Dialysis can leadleads to a reduced quality of life, asand most patients must spend several hours at a dialysis clinic three or more times a week for the remainder of their life and may suffer side effects due to dialysis.  Dialysis also increases the likelihood of serious and life-threatening complications, such as cardiovascular disease, and the five-year survival rate for hemodialysis patients is only approximately 40%42%.  The number of patients with ESRDESKD in the United States has nearly doubled in the last two decades with an estimated 700,000747,000 patients as of 2015.2017.  Approximately 30% of these patients suffer from a rare form of CKD.  In 2015,2017, Medicare spending for all beneficiaries who had CKD was $98$120 billion, of which $34$36 billion was spent on patients with ESRD.  TheESKD.

Other than JYNARQUE®, which is approved for ADPKD, the only approved therapies in the United States that affect disease progression for any rare form of CKD that affect disease progressionwe are studying are blood pressure medications, angiotensin converting enzyme (ACE) inhibitors, and angiotensin receptor blockers (ARBs), approved for diabetic nephropathy,kidney disease, that modestly slow the rate of kidney function loss.  There are no approved therapies in the United States for Alport syndrome, IgAN, T1D CKD, or the four additional rare forms of CKD addressed by our program.

Mechanism of Action of Bardoxolone Methyl in CKDFSGS.

Bardoxolone methylTargets Pathways that Contribute to GFR Loss and ESKD

Inflammatory processes initiated by a variety of pathogenic stimuli, including diabetes, systemic hypertension, IgA deposition, and genetic mutations, drive declining kidney function.  At the molecular level, these pathogenic stimuli activate pro-inflammatory signaling pathways that normally detect cellular damage or pathogens.  These signals induce mitochondrial dysfunction in which production of ATP is impaired in favor of production of pro-inflammatory mitochondrial ROS.  ROS production activates pro-inflammatory signaling complexes including NF-κB to produce TNFα, IL-6, IL-1, IFNγ, angiotensin II, and other cytokines that initiate inflammatory pathways in glomerular endothelial cells, mesangial cells, and podocytes, while also recruiting activated macrophages and other inflammatory effector cells to the renal interstitium.  At the physiological level, chronic activation of pro-inflammatory pathways in these kidney cells promotes GFR loss.  

Bardoxolone targets inflammatory pathways that contribute to kidney function loss.  The activity of Nrf2, the target of bardoxolone, has been evaluatedshown to protect the kidney in many preclinical models of CKD and, unlike blood pressure medications, bardoxolone methyl targets inflammation in the kidney.  In preclinical studies that are the subject of more than 40 recentmany peer-reviewed publications, bardoxolone methylmanuscripts.  Nrf2 gene ablation intensifies inflammation, oxidative stress, and related analogs have been shown to reduce inflammation, improve renal function, and preventkidney injury, remodeling, and fibrosis in multiple animal models of the kidney disease.  Nrf2-knockout mice exhibit a lupus-like autoimmune nephritis, and histologic analyses of kidney tissue show impaired antioxidant activity and increased oxidative damage including enlarged glomeruli, mesangial cell proliferation, GBM thickening, and glomerulosclerosis.  Kidney function is compromised in manythese animals, as evidenced by a significant decrease in creatinine clearance and survival.  Similarly, Nrf2-knockout mice are more susceptible to nephrotoxic insults and develop more severe kidney impairment in multiple animal models of kidney disease.

In a large biopsy study of 157 patients representing nine different types of CKD, patients’ biopsy samples were analyzed to determine genes and mutations associated with kidney function, as assessed clinically by eGFR.  Etiologies of CKD included thin basement membrane nephropathy, of which most are now considered patients with Alport syndrome, IgAN, diabetes, FSGS, hypertension, lupus, and others.  Eighteen genes and 97 molecular pathways were identified that affect eGFR.  Two clusters of pathways were identified that comprise inflammation and metabolic pathways, and Nrf2 was identified as a central link.  Collectively, these data establish that Nrf2 plays an important role in maintaining the kidney, the first stagefunction and structure of the blood filtering process takes placekidney.  The data also demonstrate that Nrf2 affects a final common pathway of progression across diverse etiologies of CKD.

Recently, the mechanism underlying the regulation of GFR by the Keap1/Nrf2 pathway was investigated in the glomerulus, which consistslaboratory of a small tuftDr. Naoki Kashihara at the Kawasaki Medical School in Japan.  Our proprietary Nrf2 activator RTA dh404 (10 mg/kg/day) increased single nephron GFR in the control group but not in mice lacking the Nrf2 gene (p<0.05).  In mice lacking Keap1, leading to activation of capillaries containing endothelial cells, between which are large pores, and mesangial cells, which are modified smooth muscle cellsNrf2, single nephron GFR was also elevated compared to the control group (p<0.05).  The glomerular afferent/efferent arteriole ratio was not significantly altered

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in any group, indicating that lie between the capillaries.  Tight coordination between these cell types is necessary for proper filtration.  The pores between the endothelial cells allow for the free filtration of fluid, plasma solutes, and protein.  When endothelial cells become dysfunctional, due to oxidative stress or other reasons, the pores can become more permeable and increase spillage of protein, which can drive further inflammatory signaling and oxidative stress.  The mesangial cells regulate blood flow by their contractile activity, and contractionactivation of the cells reduces surfaceKeap1/Nrf2 pathway increases GFR by increasing effective glomerular filtration area for filtration ofwithout affecting the blood.  Mesangial cells also remove proteins and other molecules trapped inafferent/efferent arteriole ratio. Additionally, RTA dh404 did not affect the glomerular basement membrane (GBM), or filtration barrier.permeability of albumin, suggesting that transient increases in albuminuria observed in clinical trials of bardoxolone are related to increases in eGFR rather than renal injury.

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In preclinical models, bardoxolone methyl improves GFR by reducing glomerular inflammation, reversing endothelial dysfunction, and restoring filtration surface area

In animal models, bardoxolone methyl and analogs reverse endothelial dysfunction and mesangial cell contraction and increase the surface areaOverview of the glomerulus, increasing GFR.  Further, data from animal models demonstrate that the compounds preserve kidney function and prevent fibrosis in multiple settings, including in modelsClinical Evidence of high blood pressure, diabetes, lupus, and excessive protein.

Clinical Trials of Bardoxolone MethylBardoxolone’s Effect on Kidney Function in CKD

Bardoxolone methyl has been evaluated in multiplePrior to our CARDINAL Phase 3 trial, clinical trials enrolling over 2,000 patients exposed to active drug, including those with CKD caused by type 2 diabetes, PAH patients, Alport syndrome patients, patients with solid tumors or lymphoma, and healthy volunteers.  Bardoxolone methyl has been shown to consistently improvebardoxolone have demonstrated consistent, clinically meaningful improvement in kidney function across several disease states as measured by eGFR and other markers of kidney function in numerous clinical trials.  Key features of bardoxolone methyl’s effects on kidney function are summarized below.

Bardoxolone Methyl Improves Kidney Function as Assessed by eGFR, Measured GFR (Inulin Clearance), and Creatinine Clearance

Bardoxolone Methyl Improved Kidney Function as Assessed by eGFR in 11 Clinical Trials

^a Change from baseline

^b Placebo-corrected change from baseline

In addition to eGFR improvements, bardoxolone methyl treatment has been shown to significantly increase directly-measured GFR in patients with type 2 diabetes and CKD using the “gold standard” inulin clearance method and to reduce the levels of blood waste products

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filtered by the kidney.  In 2017, our partner, KHK, presented results of its trial, TSUBAKI, a double-blind, randomized, placebo-controlled Phase 2 trial conducted in Japan.  In TSUBAKI, bardoxolone methyl demonstratedfunction.  Specifically, we have observed statistically significant and clinically meaningful increases in directly-measured GFR.  Moreover, measured GFR increases were significantly and positively correlated with improvements in eGFR.  The observed increase in GFR demonstrates that increases in eGFR produced by bardoxolone methyl in various forms of CKD, including Alport syndrome, reflect a true increase in kidney function.  In TSUBAKI, bardoxolone methyl demonstrated a favorable safety profile with no adverse effect on blood pressure, urine output or sodium excretion,all Phase 2 and no evidence of overt fluid overload or cardiac toxicity.

In several studies, bardoxolone methyl significantly increased creatinine clearance, another assessment of kidney function.  Importantly, these increases were not associated with a change in total 24 hour excretion of creatinine, which demonstrates that bardoxolone methyl does not affect creatinine metabolism.  In other CKD studies, bardoxolone methyl has been shown to significantly reduce blood waste products in inverse correlation to eGFR increases and to numerically reduce renal serious adverse events (SAEs) and ESRD events.  Taken together, these data demonstrate that the increases in eGFR observed in multiple CKD studies of bardoxolone methyl treatment reflect true increases in GFR and support the use of eGFR as a reliable marker of renal function.

Bardoxolone Methyl Demonstrated Sustained eGFR Increases for One and Two Years in Duration

Two separatePhase 3 clinical trials in seven distinct patient populations treated with bardoxolone, including patients with PAH and CKD caused by type 2 diabetes BEAM(T2D CKD), Alport syndrome, ADPKD, IgAN, T1D CKD, and BEACON, showed that increasesFSGS.  

We believe these data, in eGFRaddition to the CARDINAL Phase 3 data, support the potential for bardoxolone to delay or prevent dialysis, kidney transplant, and death in patients treatedwith Alport syndrome and other forms of CKD.  

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

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Bardoxolone Development Program for one year or longer with bardoxolone methyl, were sustained for at least one year.  In BEACON, bardoxolone methyl treated patients had mean increases in eGFR through Week 48the Treatment of 5.6 mL/min/1.73 m².  In contrast, placebo-treated patients experiencedCKD Caused by Alport Syndrome

Alport syndrome is a mean declinerare and serious hereditary disease that can manifest as early as the first decade of life, causes average annual declines in eGFR of -1.2approximately 3 to 4 mL/min/1.73 m², correspondingand affects approximately 30,000 to 60,000 patients in the United States.  In patients with the most severe forms of the disease, approximately 50% of patients progress to dialysis by age 25, 90% by age 40, and nearly 100% by age 60.  There are no approved therapies for Alport syndrome anywhere in the world.  

In November 2019, we announced positive topline, Year 1 results from the Phase 3 portion of CARDINAL studying bardoxolone in patients with Alport syndrome.  The Phase 3 portion of CARDINAL is an ongoing, international, multi-center, double-blind, placebo-controlled, randomized registrational trial that enrolled 157 patients with Alport syndrome at approximately 50 study sites in the United States, Europe, Japan, and Australia.  Pediatric patients represented approximately 15% of enrolled patients.  Patients were randomized one-to-one to bardoxolone or placebo.  As the CARDINAL study is ongoing, we released the one-year results under a statistically significant relative difference between groupsdata access plan submitted to the FDA designed to preserve the integrity of 6.8 mL/min/1.73 m² (p<0.001).  In BEAM, bardoxolone methyl treatedthe second year of the study and avoid disclosing data that would unblind individual patients atto their treatment assignment.

The primary endpoint for the mid- and high doses had mean increasesstudy was the change in eGFR through Weekafter 48 weeks of 14.9 mL/min/1.73 m².  In contrast, placebo-treatedtreatment.  After 48 weeks of treatment, patients experienced a mean decline in eGFR of -1.1 mL/min/1.73 m², corresponding to a statistically significant relative difference between groups of 16.0 mL/min/1.73 m² (p<0.001).

eGFR Increased in BEAM and BEACON

^a Combined mid/high dose

In February 2018, we announced that improvements in kidney function were durable for two years in LARIAT.  These data represented the longest analyzed duration patients have received bardoxolone methyl.  Patients in the placebo-controlled, double-blind phase of LARIAT had impaired kidney function upon study entry, with an average eGFR of 73.4 mL/min/1.73 m².  Patients who received treatmenttreated with bardoxolone methyl (n=71) had a statistically significant increase in eGFRimprovement compared to placebo (n=30)in mean eGFR of 10.69.50 mL/min/1.73 m² (p<0.0001) after 16 weeks of treatment.  

After completing 16 weeks of treatment, all patients in LARIAT were eligible to receive.  Patients treated with bardoxolone methyl in an open-label extension study.  At the time of the analysis, 56 patients had received at least 56 weeks of bardoxolone methyl treatment, of which 55 had an eGFR measurement at Week 56.  After 56 weeks of treatment, data demonstratedexperienced a statistically significant mean increase from baseline in mean eGFR of 10.74.72 mL/min/1.73 m²  (p=0.0004), while patients treated with placebo experienced a statistically significant decline from baseline in mean eGFR of -4.78 mL/min/1.73 m² from baseline (p<0.0001)(p=0.0002).  Additionally, 26

The key secondary endpoint for the study was the change in retained eGFR at 52 weeks.  At Week 52, patients had receivedtreated with bardoxolone methyl for at least 104 weeks, and after 104 weeks of treatment, data demonstratedhad a statistically significant improvement compared to placebo in mean increase inretained eGFR of 11.35.14 mL/min/1.73 m² (p=0.0012).  Patients treated with bardoxolone experienced a nonsignificant decline from baseline (p<0.0001).  Notably, 88%in mean retained eGFR of patients on bardoxolone methyl maintained increases in eGFR above baseline after two years of treatment.

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In the LARIAT Trial with PAH Patients, Bardoxolone Methyl Demonstrated Changes in eGFR Durable through Two Years of Treatment

PAH patients experience an estimated annual loss of kidney function of approximately 8 to 13-0.96 mL/min/1.73 m² and are extremely sensitive to any adverse perturbations of renal or cardiac function.  Additionally, the median survival for PAH(p=0.45), while patients from time of diagnosis is four to seven years.  Upon study entry, the LARIAT PAH patients had a median time since diagnosis of 3.3 years (n=101; 66 weeks median duration of treatment).  At the time of this analysis, LARIAT PAH patients hadtreated with placebo experienced a lower rate of hospitalization when compared to recent registrational and observational PAH studies, and there were no deaths among these LARIAT PAH patients.

Bardoxolone Methyl Significantly Reduced the Risk of Adverse Renal Events Validated to Predict Kidney Failure

In January 2018, a paper was published in the American Journal of Nephrology that included a characterization of bardoxolone methyl’s efficacy and longer-term effects on kidney function in BEACON.  In this study, post-hoc analysis showed that patients randomized to bardoxolone methyl were significantly less likely to experience adverse kidney outcomes as defined by a composite renal endpoint consisting of ≥30%statistically significant decline from baseline in mean retained eGFR eGFR <15of -6.11 mL/min/1.73 m², or ESRD events (p<0.0001).  This composite endpoint has recently been validated by a joint FDA, European Medicines Agency (EMA),Similar efficacy at Week 48 and the National Kidney Foundation working group.  Furthermore, bardoxolone methyl treatment resulted in a decreased number of kidney-related SAEs and ESRD events.  The authors concluded that bardoxolone methyl preserves kidney function and may delay the onset of kidney failure in patients with type 2 diabetes and stage 4 CKD.Week 52 was observed across multiple subgroups, including among pediatric patients.

Bardoxolone Methyl Decreased the Risk of Adverse Kidney Outcomes in BEACON

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Bardoxolone Methyl Produces a Retained eGFR Benefit after Withdrawal of Drug

To further assess whether increases in eGFR from bardoxolone methyl treatment have the potential to delay or prevent ESRD and the need for dialysis or a transplant over the long term, we conducted a retained benefit analysis in the BEAM and BEACON clinical trials.  In those trials, after patients had been treated with bardoxolone methyl or placebo for approximately one year, the drug was withdrawn for four weeks, and the post-withdrawal eGFR was compared to the patient’s baseline eGFR.  Bardoxolone methyl and any active metabolites are eliminated from the body within approximately 10 days after withdrawal, so we believe the post-withdrawal eGFR change is a measure of the effect of long term bardoxolone methyl treatment on the structure of the kidney and its disease-modifying potential.

Bardoxolone Methyl Produced Post-Withdrawal eGFR Benefit in BEAM and BEACON

Importantly, in both BEAM and BEACON, bardoxolone methyl treatment produced a statistically significant improvement in retained eGFR versus placebo after withdrawal of drug.  Also, the acute increase in eGFR from bardoxolone methyl treatment observed at 12 weeks was predictive of both the on-treatment and retained eGFR benefit after one year of treatment.  This finding is important because it indicates that increases in eGFR from a relatively short, 12 week, treatment periods with bardoxolone methyl may be predictive of a long term clinical benefit.  

CKD Caused by Alport Syndrome

The FDA has provided guidance to us and other sponsors that clinical trials with a retained benefit analysis may support approval in rare forms of CKD.  Specifically, the FDA has indicatedwritten guidance that, in patients with CKD caused by Alport syndrome, dataan analysis of retained eGFR demonstrating an improvement versus placebo in retained eGFR after one year of bardoxolone methyl treatment may support an NDA submission for accelerated approval and an improvement versus placebo after two years of treatment may support full approval. The second-year on-treatment eGFR will be measured after 100 weeks of treatment and the retained eGFR will be measured at Week 104 after withdrawal of drug for four weeks.  Patients who complete the study and meet eligibility requirements can participate in the open-label extension trial.  

Bardoxolone was generally reported to be well tolerated in this study.  Seventy-five patients (97%) receiving bardoxolone and 73 patients (91%) receiving placebo experienced an adverse event (AE).  The reported AEs were generally mild to moderate in intensity, and the most common AEs observed more frequently in patients treated with bardoxolone compared to patients treated with placebo, were increases in aminotransferases and muscle spasms.  Nine patients (12%) receiving bardoxolone and four patients (5%) receiving placebo discontinued study drug due to an AE, and no individual AE contributed to more than two discontinuations in either group.

Four patients (5%) receiving bardoxolone and 10 patients (13%) receiving placebo experienced a treatment-emergent SAE.  No fluid overload or major adverse cardiac events were reported in patients treated with bardoxolone.  Blood pressure was reduced relative to baseline in the bardoxolone group but was not significantly different between the two groups.  

Increases in aminotransferases are a pharmacological effect of bardoxolone, which increases production of aminotransferases in vitro. The aminotransferase increases observed in CARDINAL were associated with improvements (reductions) in total bilirubin and were not associated with liver injury, and we believe they are related to restoration of mitochondrial function.  Laboratory markers associated with pharmacodynamic (PD) activity, including urinary albumin to creatinine ratio and aminotransferases, were unchanged relative to placebo at Week 52 after a four-week withdrawal.

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Bardoxolone Development Program for the Treatment of ADPKD

ADPKD is an inherited, rare form of CKD caused by a genetic defect in PKD1 or PKD2 and is characterized by the formation of fluid-filled cysts in the kidneys.  Inflammation appears to play a role in cyst growth and is associated with disease progression in ADPKD.  PKD1 is the most common mutation, causing about 85% of ADPKD cases and patients with the PKD1 mutation to progress to ESKD, on average, by age 54.  ADPKD is the most common single-gene disorder of the kidneys, and there are an estimated 400,000 patients in the United States, with approximately 140,000 patients diagnosed.  The only therapy currently approved for ADPKD is JYNARQUE® (tolvaptan, developed by Otsuka Pharmaceuticals Co., Ltd.), which was approved in the United States during 2018.

We have initiated a registrational Phase 3 trial called FALCON in patients with ADPKD.  FALCON is an international, multi-center, randomized, double-blind, placebo-controlled trial studying the safety and efficacy of bardoxolone in approximately 300 patients with ADPKD randomized one-to-one to active drug or placebo.  We began enrollment in FALCON in May 2019.  The FDA has provided us with guidance that, in patients with ADPKD, an analysis of retained eGFR, demonstrating an improvement versus placebo after one year of bardoxolone treatment, may support an NDA submission for accelerated approval of bardoxolone for the treatment of ADPKD, and data demonstrating an improvement versus placebo in retained eGFR after two years of treatment may support full approval.  OnWe will measure the basis of this guidance, we are conducting a Phase 2/3 trial called CARDINAL in patients with CKD caused by Alport syndrome.  

Alport syndrome is a rare and serious hereditary disease caused by mutations in the genes encoding type IV collagen, a major structural component of the GBM in the kidney.  The expression of abnormal type IV collagen causes loss of GBM integrity, abnormal leakage of proteins through the GBM, and excessive reabsorption of protein in the proximal tubules of the kidney.  As in other forms of CKD, excessive reabsorption of protein in the tubules induces oxidative stress, renal interstitial inflammation, and fibrosis.  Patients with Alport syndrome experience an average annual decline inretained eGFR of 3 to 4 mL/min/1.73 m².  In patients with the most severe forms of Alport syndrome, approximately 50% progress to dialysis by age of 25, 90% by age 40, and nearly 100% by age 60.  Currently, there are no approved therapies for thebenefit versus placebo at 52 weeks after treatment of CKD caused by Alport syndrome.  The goal of current disease management is to slow the progression of CKD, beginning with anti-hypertensives, such as ACE inhibitors or ARBs, which are intended to reduce the rate of kidney function loss.  Like patients with other forms of CKD, Alport syndrome patients receiving dialysis are at increased risk for cardiovascular disease and infections, which are the most common causes of death in these patients.

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Clinical Development for Bardoxolone Methyl in CKD Caused by Alport Syndrome

CARDINAL, which is an international, multi-center, randomized, double-blind, placebo-controlled trial in the Phase 3 portion, studies the safety and efficacy of bardoxolone methyl in patients with CKD caused by Alport syndrome.  Last year, we reported the primary endpoint data for the open label, Phase 2 portion of CARDINAL, which enrolled 30 patients.  The primary endpoint data demonstrated that bardoxolone methyl significantly increased kidney function in Alport syndrome patients as measured by eGFR.  From a mean baseline eGFR of 54 mL/min/1.73 m², data showed a statistically significant mean increase of 13.4 mL/min/1.73 m² at Week 12 (p<0.000000001).  All patients demonstrated increases in eGFR at Week 12, with 87% of patients demonstrating a clinically meaningful increase in eGFR of at least 4.0 mL/min/1.73 m² and 63% of patients demonstrating an increase in eGFR of at least 10.0 mL/min/1.73 m².  Additionally, 73% of patients had an improvement in CKD stage, and none worsened.  Clinically meaningful increases in eGFR were demonstrated across multiple subgroups, with activity in both earlier and later stages of disease.

As of the 12-week primary endpoint visit for the Phase 2 portion, no discontinuations or SAEs were reported, and reported adverse events (AEs) were generally mild to moderate in intensity.  Consistent with prior studies, the most common AEs that were reported in more than two patients were muscle spasms (15/30; 50%), headache (4/30; 13%), nausea (4/30; 13%), fatigue (4/30; 13%), and hyperkalemia (3/30; 10%).  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.  Patients in the Phase 2 portion of CARDINAL will continue on study drug for two years, and a retained benefit analysis after withdrawal of drug will be performed after both one and two years of treatment.  Retained eGFR data at 52 weeks from the Phase 2 portion of CARDINAL are expected to be available in the third quarter of 2018.

Because we observed a significant increase in eGFR after 12 weeks of treatment in the Phase 2 portion of CARDINAL, we began enrolling the Phase 3 portion of CARDINAL last year.  The Phase 3 study will enroll approximately 150 patients randomized evenly to either bardoxolone methyl or placebo.  We will assess on-treatment eGFR at 48 weeks and retained eGFR at 52 weeks.a four-week withdrawal of drug.  After 52 weeks, patients will be restarted onresume study drug with their original treatment assignments and will continue on study drug for a second year.  The second year on-treatmentsecond-year retained eGFR will be measured after 100 weeks and the retained eGFRbenefit will be measured at Week 104.  We expect to have one year top-line

FALCON was designed and powered based on data from the ADPKD cohort of the Phase 3 portion2 PHOENIX trial.  In PHOENIX, bardoxolone demonstrated a statistically significant increase from baseline in eGFR of CARDINAL9.3 mL/min/1.73 m² (p<0.0001) after 12 weeks of treatment in 31 patients with ADPKD.  Historical data available for 29 of the patients showed that their eGFR declined an average of 4.8 mL/min/1.73 m² per year in the second half of 2019.  We have received orphan drug designation from the FDA for bardoxolone methyl for the treatment of Alport syndrome.

The trial is being overseen by a data monitoring committee (DMC) that reviews all data, including SAE and AE data, on an unblinded basis,three-year period prior to assess safety.  The DMC has not reported any safety concerns to date.

Market Opportunity for Bardoxolone Methyl in Chronic Kidney Disease Caused by Alport Syndrome

There are no therapies currently approved for CKD caused by Alport syndrome.  Alport syndrome is a rare and serious hereditary disease that we believe, based on literature, affects approximately 12,000 children and adultsenrolling in the United States and 40,000 globally.  Approximately 1,200trial.  The magnitude of improvement in eGFR observed with bardoxolone represents the United States patients are identifiedrecovery of approximately two years of average decline in kidney function in the Alport Syndrome Foundation’s registry.  Patientspatients in this trial.  The ADPKD patients showed a high response rate, with Alport syndrome are often misdiagnosed with other congenital kidney diseases.  In addition, family members of patients with Alport syndrome may not be formally diagnosed.  We believe that, with the development of an effective treatment for Alport syndrome, identification of patients with CKD caused by Alport syndrome will increase.all but one patient showing improvement at Week 12.  No drug-related SAEs were reported and reported AEs were generally mild to moderate in intensity.

Bardoxolone MethylDevelopment Program for the Treatment of Other Rare Kidney Diseases

Because weWe believe the mechanism of action of bardoxolone methyl addresses a final common pathway of kidney function loss, and because we have observed significant increases in eGFR in patients with declining kidney function from a variety of diseases,diseases.  As a consequence, we are conducting an additional clinical studyconducted a Phase 2 trial called PHOENIX to assess whether bardoxolone methyl treatment can improve kidney function in patients with four additional rare forms of CKD, includingCKD: ADPKD, IgA nephropathy, type 1 diabeticIgAN, T1D CKD, and FSGS.  There are no therapies currently approved for these rare forms of CKD, except for tolvaptan for the treatment of ADPKD, which was approved outside of the United States.  ADPKD is an inherited, rare form of CKD characterized by formation of fluid-filled cysts in the kidneys.  There are an estimated 116,000 diagnosed ADPKD patients in the United States.  IgA nephropathyIgAN is a rare form of CKD caused by the deposition of IgA complexes in the kidney and is estimated to affect 120,000 patients in the United States.  CKD is a common complication of type 1 diabetes T1D and is estimated to affect 20% of the approximately one million type 1 diabetes T1D patients in the United States.  FSGS is a rare form of CKD that results from scarringthe chronic inflammation and chronic inflammationscarring of the glomeruli and affects an estimated 55,00040,000 patients in the United States.

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PHOENIX is an open-label, multi-center Phase 2 trial to evaluateIn aggregate, the safety and efficacyprevalence of the five rare renal diseases in which we have generated clinical data exceeds 700,000 patients in the United States, representing a meaningful market for bardoxolone methyl in patients with ADPKD, IgA nephropathy, type 1 diabetic CKD, or FSGS.  We plan to enroll approximately 25 patients of each of these rare forms of CKD.

In PHOENIX, a total of 103 patients were enrolled in four separate cohorts and treated with bardoxolone for 12 weeks.  Each cohort showed statistically significant increases in mean eGFR at Week 12, as shown in the table below.

Of the patients that reached Week 12, 88% experienced increases in eGFR at Week 12.  We also observed that bardoxolone significantly reduced mean systolic blood pressure by 3.8 mmHg (n=103; p=0.002) and mean diastolic blood pressure by 2.8 mmHg (n=103; p=0.0009).  Urinary albumin excretion was low upon study entry and remained unchanged by bardoxolone treatment (n=103; p=0.6).  The most commonly reported AE across all cohorts was muscle spasms, which were not associated with clinical signs or symptoms of muscle injury.  The overall rate of SAEs was low, with three patients reporting treatment-emergent SAEs, none of which were reported as related to bardoxolone.

Based on the eGFR improvements observed in PHOENIX patients, we also plan to pursue IgAN, T1D CKD, and FSGS as commercial indications.  We believe that registrational clinical trials similar to evaluate the effectdesign of bardoxolone methyl treatment on kidney function, as assessed by eGFR after 12 weeks of treatment.  Since eGFR data at 12 weeks has correlatedthe Phase 3 CARDINAL and FALCON trials, with longer term on-treatmenta two-year duration and a retained eGFR benefit we planendpoint after one and two years of treatment, would be sufficient to utilize information fromform the Phase 2 trialbasis of an NDA submission to determine what indicationsthe FDA to prioritizeseek accelerated approval based on one year data and move forward into registrational studies.  We have enrolled patients in PHOENIX from each of the four rare forms of CKD, and expect to have top-line data from one or more of the four cohorts available during the second half of 2018.

Bardoxolone Methyl History of Development in Diabetic CKD

Prior to initiating the current clinical development programs in CTD-PAH and CKD caused by Alport syndrome, bardoxolone methyl was evaluated in six Phase 1 and 2 studies that demonstrated significant improvements in kidney function as evidenced by increases in eGFR and other markers of kidney function as discussed above.  Basedfull approval based on the Phase 2 results, we conducted BEACON, a large, multinational Phase 3 trial in patients with CKD caused by type 2 diabetes.  In 2010, when the study was initiated, guidance from the FDA required that the study demonstrate thattwo year data of bardoxolone methyl treatment significantly reduce the risk of ESRD and death events for approval.  Because CKD patients’ kidney function declines very slowly over a long period of time, BEACON enrolled only severe or Stage 4 CKD patients that had baseline eGFR values close to the threshold for ESRD.

During October 2012, BEACON was terminated early in response to the independent DMC’s recommendation to stop the trial for safety concerns.  After the trial was terminated, analysis revealed that there was a small but significant imbalance in heart failure events of 5.0% on placebo and 8.8% on active drug, but no statistical difference in mortality.  The primary reason for the increase in heart failure events was fluid overload that occurred in the first four weeks after randomization.  Patients with fluid overload events who were treated with intravenous diuretics resolved their symptoms, and there was no increase in risk for fluid overload, as compared to placebo, after the first four weeks of treatment.

Further investigation, including additional preclinical studies, indicated that bardoxolone methyl modulates the endothelin pathway.  In patients with Stage 4 and 5 CKD caused by diabetes, the endothelin pathway is dysregulated and, under certain circumstances, activation of this pathway can put these patients at greater risk for fluid retention.  Patients who have less compromised kidney function do not have dysregulation of this pathway, and their kidneys are able to excrete excess fluid.  Similar fluid overload events had been observed previously in patients with late-stage CKD caused by diabetes treated with other therapies, including endothelin receptor antagonists (ERAs), which are vasodilating agents that are currently approved for the treatment of PAH.  This reviewthese forms of data from PAH trials prompted our interestCKD.

AYAME Trial in the applicabilityDiabetic CKD Conducted by KKC

Upon completion of the pharmacology of Nrf2 activators, particularly their mitochondrial and anti-inflammatory effects, to PAH.  

Post-hoc analysis from BEACON identified three major risk factors as predictors of fluid overload events: Stage 4 CKD caused by diabetes, prior hospitalization for heart failure, and baseline elevation in B-type natriuretic peptide (BNP), a clinical chemistry measure of fluid status.  Bardoxolone methyl-treated patients that experienced heart failure events in BEACON had mean BNP values at baseline and before receiving study drug of approximately 550 pg/mL.  Normal BNP levels are 100 pg/mL, suggesting many of the patients with fluid overload were in heart failure prior to randomization.  Patients without these risk factors showed no imbalance in heart failure events or mortality, which is consistent with the Phase 2 trials conducted by us that primarily enrolledTSUBAKI study, KKC’s clinical study of bardoxolone in patients with Stage 3 and 4 diabetic CKD caused by diabetesin Japan, and did not showsuccessful discussions with the Japanese Pharmaceutical and Medical Devices Agency (PMDA), KKC initiated a riskPhase 3 outcomes trial called AYAME in patients with Stage 3 or 4 diabetic CKD in Japan. The primary endpoint is time to onset of fluid overload.  There were no other significant adverse safety findingsa ≥ 30% decrease in eGFR from the BEACON trial,baseline or ESKD.  KKC completed patient enrollment in AYAME in June 2019 and patientsexpects to have topline data in the treatment arm had fewer kidney and liver-related SAEs than patientsfirst half of 2022.

Programs in Neurological Diseases

We are developing omaveloxolone for the placebo arm.  

Based on these findings, we resumed clinical development of bardoxolone methyl, excluding at-risk patients by using identified risk factors and closely monitoring trial participants for signs and symptoms of fluid retention during the first few weeks after treatment initiation.  Risk mitigation features have been implemented in all clinical trials of bardoxolone methyl in CKD patients including CARDINAL, our global Phase 2/3 study of patients with Alport syndrome, and PHOENIX, a study in patients with CKD due to FSGS, type 1 diabetes mellitus, IgA nephropathy, or ADPKD.  Our partner, KHK, implemented risk mitigation features in TSUBAKI, their clinical study of bardoxolone methyl in patients with type 2 diabetes and Stage 3 and 4 CKD in Japan. We have also implemented risk mitigation procedures in CATALYST, our global Phase 3 study of patients with CTD-PAH, and LARIAT, our Phase 2 study of patients with PAH.  The risk mitigation strategies adopted for bardoxolone methyl and omaveloxolone are similar to those adopted by developers of endothelin receptor antagonists.  For example, the inclusion/exclusion criteria for trials studying AbbVie’s ERA atrasentan and Retrophin’s ERA/ARB drug sparsentan utilize a patient’s prior history of heart failure, current heart failure, and elevated BNP as key components of their exclusion criteria.

To date, none of these studies have shown an increased risk for acute fluid overload AEs with bardoxolone methyl treatment.  The absence of overt fluid overload or subclinical measures of heart failure, including meaningful increases in blood pressure, BNP, or body weight, in these studies support that prospectively enrolling patients who are not at risk for heart failure may effectively mitigate the risk for acute heart failure with bardoxolone methyl previously seen in patients with diabetes and late-stage CKD.

Omaveloxolone for the Treatment of Neuromuscular Diseases

Our lead program in neuromuscular diseases is FA, which is currently in the registrational part 2 of a Phase 2 trial.  Neuromuscular diseases are commonly driven by impairment of mitochondrial function, due to the high energy demand of the nervous system.  All

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components of the neuromuscular system, including muscle, the neuromuscular junction, peripheral nerves, spinal cord, and the brain, can be affected.  These diseases include ataxias, stroke, Parkinson's disease, multiple sclerosis, Huntington's disease, and many others.  These diseases can strike as early as infancy, and symptoms can include poor growth, loss of muscle coordination, muscle weakness, visual problems, hearing problems, learning disabilities, neurological problems, autonomic dysfunction, and dementia.

Friedreich’s Ataxia

FA is an inherited, debilitating, and degenerative neuromuscular disorder caused by a mutation in the frataxin gene, whichthat is typicallyusually diagnosed during adolescence and can ultimately lead to premature death.  In October 2019, we announced that the registrational Part 2 portion of the MOXIe Phase 2 trial of omaveloxolone in patients with FA met its primary endpoint of change in mFARS relative to placebo after 48 weeks of treatment.  Patients treated with omaveloxolone (150 mg/day) demonstrated a statistically significant, placebo-corrected 2.40 point mean improvement (decrease) in mFARS after 48 weeks of treatment (p=0.014).  Omaveloxolone treatment was generally reported to be well-tolerated.  Based on these positive results, and subject to discussions with regulatory authorities, we plan to proceed with the submission of regulatory filings this year for marketing approval of omaveloxolone for the treatment of FA in the United States.  

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We are developing RTA 901 for the treatment of neurological diseases.  RTA 901 is a highly potent and selective C-terminal modulator of Hsp90, which has a critical role in mitochondrial function, protein folding, and inflammation.  RTA 901 has demonstrated profound efficacy in a wide range of animal models of neurological disease, including diabetic neuropathy, neuroinflammation, and neuropathic pain.  RTA 901 has been evaluated in a Phase 1 clinical trial in healthy volunteers, with no safety or tolerability issues and with an acceptable pharmacokinetic profile. We plan to continue development for RTA 901 in neurological diseases such as diabetic neuropathy.

Omaveloxolone Development Program for the Treatment of Friedreich’s Ataxia

FA is an inherited, life-shortening, debilitating, and degenerative neuromuscular disorder, which is normally diagnosed during adolescence.  Patients with FA experience initial symptoms in childhood, including progressive loss of coordination, muscle weakness, and fatigue, commonly resulting in motor incapacitation, with patients requiring a wheelchair by their teens or early death.  A mutation20s.  FA patients may also experience visual impairment, hearing loss, diabetes, and cardiomyopathy.  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.

FA is typically caused by a trinucleotide repeat expansion in the first intron of the frataxin gene, leadswhich encodes the mitochondrial protein frataxin.  Pathogenic repeat expansions can lead to impaired transcription and reduced frataxin expression, of the mitochondrial protein frataxin.  Deficiency of frataxin in cells leadswhich can lead to a mitochondrial iron overload and poor cellular iron regulation, increased sensitivity to oxidative stress, and impaired mitochondrial ATP production.  Impaired ATP production in

Diagnosis of FA patients likely accounts for the decreased coordination, progressive muscle weakness, exercise intolerance,typically occurs by genetic testing, and fatigue observed in these patients, as well as other disease manifestations.  Patientsapproximately 75% of people with FA experience progressive lossare diagnosed between six and 20 years of coordination, muscle weakness, and fatigue, which commonly progresses to motor incapacitation and wheelchair reliance.  FA patients may also experience visual impairment, hearing loss, diabetes, and cardiomyopathy.  

age.  Childhood-onset FA can occur as early as age five, is more common than later-onset FA, and typicallynormally involves more rapid disease progression.  Most FA patients have disease onset by approximately 13 to 15 years of age and, thereafter, have a mean duration until wheelchair use of 10 to 15 years.  The medianmean age of death for FA patients is in the mid-30s.  There35 years.  Currently, there are no currently approved therapies for the treatment of FA.  Patients are usually given guidelines aroundfor certain lifestyle habits and are recommended to follow a diet that is low in iron and encouraged to take vitamins and supplements.

Rationale for Omaveloxolone in Friedreich’s AtaxiaFA

Because impaired ATP production in FA patients likely accounts for the decreased coordination, progressive muscle weakness, decreased coordination, exercise intolerance, and fatigue observed in these patients, as well as other disease manifestations, we believe that omaveloxolone may be effective in treating this indication.  In FA patients, mitochondrial function is correlated with measures of neurologic function.  Further, data demonstrate that Nrf2 signaling is significantly impaired in FA patients, resulting in impairment of antioxidant defense mechanisms, while silencing of frataxin gene expression has been linked to decreases in expression of Nrf2.  Additionally, omaveloxolone has been shown in vitro to restore mitochondrial activity in fibroblasts isolated from FA patients.  Accordingly, we believe that Nrf2 activation throughby omaveloxolone may result in a clinical benefit to FA patients.

Clinical Development forof Omaveloxolone in FA

We are evaluating omaveloxolone in theOur Phase 2 trial, called MOXIe, trial,was a two-part, international, multi-center, randomized, double-blind, placebo-controlled double-blind, dose-escalation, registrational Phase 2 trial to evaluatethat studied the safety and efficacy of omaveloxolone in patients with FA.  All dose groups had small sample sizesAdditionally, patients who completed the study and were not powered to demonstrate statistical significance. Data from partmet eligibility requirements can participate in the open-label extension.  Part 1 of the trial demonstrated that, the maximum effect on mFARS scoresMOXIe was observed at the 160 mga dose-ranging study designed to assess safety and identify an optimal dose level, which was administeredof omaveloxolone to a total of 12 patients, with a statistically significant improvement in mFARS scores of 3.8 points versus baseline (p=0.0001) and of 2.3 points relative to placebo (approached statistical significance, p=0.06).  We observed that omaveloxolone produced greater improvements in mFARS scores in patients that did not have a preexisting musculoskeletal foot deformity that causes high arched feet, called pes cavus, with the maximum effect on mFARS scores at the 160 mg dose level, showing a statistically significant improvement at Week 12 of 6.0 points versus baseline (p<0.0001) and of 4.4 points relative to placebo (p=0.01).  The observed improvement in mFARS scores at Week 12 for the 7 placebo patients without pes cavus of 1.6 points was similar to that observed in all 17 placebo patients of 1.4 points.  Data from the 160 mg dose are showntest in the graph below.  

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mFARS Improved with 160registrational part 2 portion of the study.  A dose of 150 mg Dose

The trial is being overseenper day was selected for part 2, and no safety concerns were noted by athe data safety monitoring board (DSMB) that reviewsoversaw the trial and reviewed all safety data.  

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Based on data including SAE and AE data, on an unblinded basis to assess safety.  No safety concerns were identified by the DSMB infrom part 1 of MOXIe, we designed and only two SAEs were reported, with both events occurring in placebo-treated patients.  The most common AEs in excess to placebo in the omaveloxolone group were upper respiratory tract infections and nasopharyngitis, which were generally mild in severity.  Omaveloxolone was reported to be well-tolerated with only a single discontinuation in a 40 mg patient who developed a skin rash.  One placebo patient discontinued prematurely due to withdrawal of consent.

We are conductingpowered part 2 of MOXIe, which will enroll approximately 100an international, multi-center, double-blind, placebo-controlled, randomized registrational Phase 2 trial, that enrolled 103 patients with FA patientsat 11 trial sites in the United States, Europe, and Australia.  Part 2 of MOXIe is the largest global, interventional trial ever conducted in FA.  Patients were randomized evenlyone-to-one to either 150 mg of omaveloxolone or placebo.  The primary analysis population included patients without pes cavus (n=82), a musculoskeletal foot deformity that may interfere with the patient’s ability to perform some components of the neurological exam used to score the primary endpoint of the study.  Safety analyses were evaluated in the all randomized population (n=103).

The primary endpoint for the trial iswas the change from baseline in the mFARS score in patients treated withfor omaveloxolone comparedrelative to placebo atafter 48 weeks.  Additional endpoints will include the change from baseline in peak work during maximal exercise testing, Patient Global Impressionweeks of Change, and Clinical Global Impression of Change.  All patients who complete the treatment period are eligibletreatment.  The mFARS is a physician-assessed neurological rating scale used to continue intomeasure FA disease progression.  The FDA has indicated that mFARS is an extension trialacceptable primary endpoint to evaluate the intermediate and long-term safetyeffect of omaveloxolone.  Thoseomaveloxolone for the treatment of patients who had been receiving placebo will be converted to omaveloxolone in the extension trial.  The FDA has confirmed that mFARS is acceptable as the primary endpoint for part 2 of MOXIewith FA and that it may consider either accelerated or full approval based on the overall results of the trial and strength of the data.  We expect to complete MOXIe and have top-line data availableOmaveloxolone treatment demonstrated statistically significant evidence of efficacy for the primary endpoint of the trial, producing a placebo-corrected 2.40 point mean improvement (decrease) in mFARS (n=82; p=0.014).  Patients treated with omaveloxolone experienced a mean improvement (decrease) in mFARS of -1.55 points from baseline, while patients treated with placebo experienced a mean worsening (increase) in mFARS of +0.85 points from baseline.

Further, the observed placebo-corrected improvements in mFARS were time-dependent, increasing over the course of treatment with the largest improvement observed after 48 weeks of treatment.  

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Omaveloxolone treatment also demonstrated statistically significant evidence of efficacy in mFARS at Week 48 when the pes cavus patients were included in the second halfanalysis (the all randomized population).  In the all randomized population, omaveloxolone treatment produced a statistically significant, placebo-corrected 1.93 point mean improvement (decrease) in mFARS (n=103; p=0.034).  Omaveloxolone treatment also improved several secondary endpoints included in the trial.

Omaveloxolone was reported to be generally well-tolerated in this trial.  Four (8%) omaveloxolone patients and two (4%) placebo patients discontinued trial drug due to an AE.  The reported AEs were generally mild to moderate in intensity, and the most common AEs (i.e., reported in > 20% of 2019.  We have received orphan drug designation frompatients in either treatment group) observed more frequently in omaveloxolone compared to placebo were headache, nausea, increased aminotransferases, fatigue, and abdominal pain.  Increases in aminotransferases are a pharmacological effect of omaveloxolone, which increases production of aminotransferases in vitro, which we believe are related to restoration of mitochondrial function.  In MOXIe, the FDAaminotransferase increases were associated with improvements (reductions) in total bilirubin and were not associated with liver injury.  

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

Based on the positive MOXIe results, and subject to discussions with regulatory authorities, we plan to proceed with the submission of regulatory filings this year for omaveloxolone formarketing approval in the treatment of FA.

We have observed no significant tolerability issues in MOXIe to date.  The DSMB has not reported any safety concerns to date.United States.

Market Opportunity for Omaveloxolone in Friedreich’s Ataxia

FA is an ultra-orphan disease with a prevalence ranging from 0.7 to 5 per 100,000 in Caucasians globally.disease.  Based on literature and proprietary research, we believe there are approximately 22,000 peopleindividuals globally with FA, including 6,0005,000 in the United States.  Approximately 2,7003,600 worldwide patients are identified on the Friedreich’s Ataxia Research Alliance’s registry, including approximately 1,5001,800 in the United States.  PatientsFA impacts children and young adults, leading to wheelchair use and severely shortened life expectancy.  There is no approved therapy, and we believe treatment for FA patients is primarily concentrated in 9 FA centers of excellence, 10 ataxia centers, and 26 Muscular Dystrophy Association centers.  If approved by regulatory authorities, omaveloxolone has the potential to be the first therapy for the treatment of FA.  

Omaveloxolone in Other Neurological Diseases

Because mitochondrial dysfunction is a key feature of many neuromuscular diseases, we believe omaveloxolone may be broadly applicable to treat neuromuscular diseases by activating Nrf2 to normalize and improve mitochondrial function and ATP production.  We have studied omaveloxolone and other Nrf2 activators in preclinical models of neuromuscular and neurological disease, including Huntington’s disease, ALS, Parkinson’s disease, Alzheimer’s disease, and epilepsy.  Our Nrf2 activators reduced seizure frequency in refractory, progressive epilepsy models and restored mitochondrial function in biopsy samples from FA, ALS, and familial Parkinson’s disease patients.  In clinical trials, improvements in neuromuscular function have been observed in FA patients treated with FA are often undiagnosed or are misdiagnosedomaveloxolone 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 a different cerebellar ataxia.  However,primary mitochondrial disease.  Accordingly, we believe that if anomaveloxolone has the potential to treat a number of neuromuscular diseases that currently have few or no effective treatmenttherapies, and we plan to pursue the development of omaveloxolone and our other Nrf2 activators for FAone or more of these diseases.

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RTA 901 in Neurological Diseases

RTA 901 is approvedthe lead product candidate from our Hsp90 modulator program, which includes highly potent and marketed, more patients will be genetically tested forselective 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 diagnosed with FA.neuropathic pain.  RTA 901 administered orally once-daily has been observed to rescue existing nerve function, restore thermal and mechanical sensitivity, and improve nerve conductance velocity and mitochondrial function in rodent disease models.  We have completed a Phase 1 trial to evaluate the safety, tolerability, and pharmacokinetic profile of RTA 901 in healthy adult volunteers.  No safety or tolerability concerns were reported.  We plan to continue RTA 901 development activities in neurological diseases such as diabetic nephropathy. We are the exclusive licensee of RTA 901 and maintain worldwide commercial rights.

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Omaveloxolone in Other Neuromuscular DiseasesClinical Programs

In addition to our lead programs in rare forms of CKD and a rare neurological disease, we are exploring additional clinical and preclinical programs.  Our most advanced program outside of CKD and neurological diseases is the MOXIepivotal CATALYST study of Bardoxolone in CTD-PAH.  Additionally, we are developing RTA 1701, the lead product candidate from our proprietary series of RORγt inhibitors, for the potential treatment of a broad range of autoimmune, inflammatory, and fibrotic diseases.  We have completed a Phase 1 trial in FA, we recently conducted MOTOR, an exploratory, dose-escalation Phase 2 trial, evaluatingto evaluate the safety, efficacy, pharmacokinetics,tolerability, and pharmacodynamics activitypharmacokinetic profile of omaveloxoloneRTA 1701 in patients with mitochondrial myopathies (MM), a multi-systemic group of heterogenous myopathies that are caused by over 200 different genetic mutations.  The sample size of six to ten patients randomized to omaveloxolone and two to three randomized to placebo at each dose level was based on a traditional dose-escalation design.  The small number of patients at each dose was not expected to fully characterize safety, efficacy, or pharmacodynamics, but rather to inform the DSMB and us of the appropriate dose to select for future study.  Omaveloxolone did not improve peak work or 6-minute walk distance versus placebo, which were the primary and secondary endpoints of the trial.  However, at the optimal dose of 160 mg, significant, placebo-corrected improvements were noted in Nrf2 biomarkers.  Additionally, in the submaximal exercise test, which is a more sensitive assessment of mitochondrial function, a significant lowering of heart rate and blood lactate levels versus placebo was observed.  At Week 12, patients treated with 160 mg of omaveloxolone demonstrated a placebo-corrected reduction in heart rate of 12.0 beats per minute (p=0.01) and blood lactate of 1.3 mM (p=0.04).  The decrease in heart rate and lactate levels produced by omaveloxolone are indicative of improved mitochondrial function and may be useful in determining the development path of omaveloxolone.  The DSMB did not report any safety concerns in the trial.  

healthy adult volunteers.  We plan to continue evaluating datadevelopment for omaveloxoloneRTA 1701 in our neuromuscular trials, as well as regulatory endpoints in the neuromuscular disease space, to determine our next steps in development.  autoimmune, inflammatory, or fibrotic diseases.

Bardoxolone MethylDevelopment Program for the Treatment of CTD-PAH and Other Pulmonary Hypertension Diseases

Our lead program in the pulmonary hypertension (PH) space isWe are studying bardoxolone in CTD-PAH, which is currently in a Phase 3 trial called CATALYST.  Mitochondrial dysfunction, inflammation,late and proliferative signaling are common to the pathophysiologyoften fatal manifestation of many pulmonary hypertensive diseases.  In addition, the anti-inflammatorytypes of autoimmune disease, including systemic sclerosis (scleroderma), systemic lupus erythematosus, mixed connective tissue disease, and anti-fibrotic propertiesothers.  CTD-PAH is a subset of bardoxolone methyl may be relevant to preventing remodeling of pulmonary vasculature and may lead to longer term positive effects in the diseases.  

Pulmonary Arterial Hypertension Associated with Connective Tissue Disease

PAH, which results in a progressive increase in pulmonary vascular resistance, which ultimately leadsleading to right ventricular heart failure and death.  Female PAH patients outnumber males by a factor of two to one, and the onset of PAH generally occurs between the ages of 40 and 60, with the average age of onset being 53.  CTD-PAH is a late and often fatal manifestation of many types of autoimmune disease, including systemic sclerosis (scleroderma), systemic lupus erythematosus, mixed connective tissue disease, and others.  In comparison to patients with I-PAH, CTD-PAH patients are generally less responsive to existing therapies, have a worse prognosis and experience a higher occurrence of small vessel fibrosis and pulmonary veno-obstructive diseases.CTD-PAH represents approximately 30% of the overall PAH population in the United States, and approximately 10-15% of patients with scleroderma or lupus erythematosus.  In the United States, the five-year survival rate for CTD-PAH patients is approximately 44% compared to I-PAH patients, who have a 68% five-year survival rate,rate.

PAH is a systemic disease affecting tissues beyond the cardiopulmonary system.  Inflammation and sclerodermaoxidative stress contribute to metabolic dysfunction, which promotes bioenergetic deficits and mitochondrial dysfunction.  The resulting reduction in glucose uptake, lipid oxidation, and cellular energy production translate to dyspnea, fatigue, and impaired functional activity in PAH patients despite optimal vasodilator therapy.  Mitochondrial dysfunction has also been connected with CTD-PAH have a five-year survival rate of approximately 10%, compared to a five-year survival rate of 85% for sclerodermaphenotype in pulmonary arterial smooth muscle cells that may accelerate disease progression in PAH.  Mitochondrial dysfunction in PAH patients without CTD-PAH.is characterized by, not only decreased Nrf2 activity but also increased NF-kB activity.

Three classes of drugs are currently used to treat all etiologies of PAH: ERAs, nitric oxide pathway modulators,endothelin receptor antagonist (ERAs), PDE-5 inhibitors, and prostacyclins pathway agonists.prostacyclins.  These agents are all systemic vasodilators that do not address the role of mitochondrial dysfunction and inflammation in PAH.  Furthermore, their systemic hemodynamic effects can result in hypotension and syncope, or fainting, headache, flushing, and jaw pain, which generally limit their clinical effectiveness and can be exacerbated by clinically significant drug-drug interactions when used in combination.

VasodilatorsIn comparison to patients with I-PAH, CTD-PAH patients are generally less responsive to existing therapies; therefore, vasodilators approved for PAH also generally do not yield as significant functional improvements in CTD-PAH patients as I-PAH patients.  A meta-analysis of 11 registrationalpivotal trials comprised of more than 2,700 PAH patients published in the November 2015 issue of American Journal of Respiratory and Critical Care Medicine demonstrated that CTD-PAH patients benefit less from vasodilator therapies thenthan I-PAH patients when measured by clinical worsening and improvements in 6MWD, with a response in CTD-PAH patients (9.6 meters) of approximately one-third of the response in I-PAH patients (30 meters).  Therefore, vasodilators provide a poor risk-benefit for CTD-PAH patients given minimal treatment effect and AEs.

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Rationale for Bardoxolone in CTD-PAH

Bardoxolone directly targets the bioenergetic and inflammatory components of PAH.  PAH patients experience mitochondrial dysfunction, increased NF-kB activity, and related inflammatory pathways involved in ROS-mediated signaling, cellular proliferation, and fibrosis.  Bardoxolone, through the combined effect of Nrf2 activation and NF-kB suppression, has the potential to inhibit inflammatory and proliferative signaling, suppress ROS production and signaling, reduce the production of proteins related to fibrosis and tissue remodeling, and increase cellular respiration and ATP production.  Bardoxolone targets multiple cell types relevant to PAH, including endothelial cells, smooth muscle cells, and macrophages.  Additionally, unlike current therapies, bardoxolone does not cause systemic hemodynamic effects or drug-drug interactions in PAH patients.  Therefore, by addressing a novel pathway in PAH, we believe that bardoxolone may provide additional benefits beyond current PAH therapies, including increased functional capacity, effects beyond functional improvements, broader applicability, and as a combination therapy.

Clinical Development for Bardoxolone Methyl in Pulmonary Arterial Hypertension Associated with Connective Tissue DiseaseCTD-PAH

We are conducting CATALYST, a multi-center, international, randomized, double-blind, placebo-controlled Phase 3 trial examining the safety and efficacy of bardoxolone methyl in patients with CTD-PAH when added to standard-of-care vasodilator therapy.  Patients will be on up to two background therapies and will be randomized evenly to either bardoxolone methyl or placebo, and the study drug will be administered once daily for 24 weeks.  Patients randomized to bardoxolone methyl will start at 5 mg and will dose-escalate to 10 mg at Week 4 unless contraindicated clinically.  Based on discussion with the FDA, the primary endpoint of the study is the change from baseline in 6MWD relative to placebo at Week 24.  The trial will enroll between 130 and 200 patients,is conservatively powered and all patients who complete the treatment period are eligible toand meet eligibility requirements may continue into an extension trial to evaluate the intermediate and long-term safety of bardoxolone methyl.  Those patients who had been receiving placebo will be converted to bardoxolone methyl in the extension trial.  Data from CATALYST are expected to be available during the second half of 2018.  The final sample size will be determined by a pre-specified, blinded sample size re-calculation based on 6MWD variability and baseline characteristics.  The timing of data release may change if the sample size increases.  We have received orphan drug designation from the FDA for the treatment of PAH.bardoxolone.  

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CATALYST was designed based on data from LARIAT.  Based on findingsLARIAT, a Phase 2 trial in PAH.  Initial results from our Phase 2 LARIAT trial in patients with moderatePAH showed that bardoxolone provided the greatest improvement in 6MWD to severe anemia, which representpatients with CTD-PAH.  Patients with CTD-PAH treated with bardoxolone demonstrated a small percentagestatistically significant increase in mean 6MWD of the patient population, are being excluded38.2 meters (p<0.001) compared to baseline and a placebo-corrected change in 6MWD of 28.4 meters (p=0.07).  Further analysis of data from patients with CTD-PAH who would be eligible for inclusion in our Phase 3 trial, CATALYST, because data demonstrated that treatment with iron supplementation or erythropoietin can affecta statistically significant increase in mean 6MWD values independent of study drug effect.  42.7 meters (p<0.001) compared to baseline and a placebo-corrected change in 6MWD of 48.5 meters (p=0.005).

The primary endpoint in CATALYST, which will be analyzed using the mixed-model repeated measures (MMRM) statistical analysis method, is the placebo-corrected change in 6MWD from baseline to the end-of-treatment at 24 weeks.  As part of the planning to determine the sample size for CATALYST, we performed an analysis applying the MMRM statistical analysis method for CATALYST to the available end-of-treatment change in 6MWD data from CTD-PAH patients in LARIAT.  The LARIAT end-of-treatment analysis at Week 16 shows placebo-corrected change in 6MWD of 48.5 m (p=0.005) in patients without anemia and 21 m (p=0.037) in initial cohorts at doses of 2.5, 5 and 10 mg.  A clinically meaningful improvement of 28.4 m (p=0.07) was observed across all patients.  The summary of our analysis using the change at the end of the treatment period on all patients and patients without anemia is shown in the table below.

End-of-Treatment 6MWD Changes for CTD-PAH Patients in LARIAT22

Patients with anemia at baseline demonstrated larger variability and are excluded in CATALYST.  CATALYST is designed to detect a minimum treatment effect of 12.5 meters versus placebo assuming a standard deviation of 50 meters.  The observed treatment effect in the LARIAT CTD-PAH subgroup analyses, both with and without the anemic patients included, is meaningfully larger than the minimally detectable treatment effect in CATALYST.  Overall, bardoxolone was well tolerated in the LARIAT trial.  Among all PAH patients in Part 1, the most common AEs that were reported with higher incidence in the bardoxolone group compared with the placebo group included dyspnea (12.7% of patients), urinary tract infection (15.5%), decreased appetite (14.1%), and muscle spasm (16.9%).  Among all PAH patients in the placebo-controlled portion of the trial, one SAE of moderate pneumonia was considered by the investigator to be possibly drug-related.  After completing 16 weeks of treatment, all patients in LARIAT were eligible to receive bardoxolone in an open-label extension study.  

The CATALYST is overseen by a DSMB that reviews alltrial has been fully enrolled with 202 patients.  Top-line data including SAEfrom CATALYST are expected to be available in mid-2020, and, AE data, onif successful, may support an unblinded basis to assess safety.  The DSMB has not reported anyNDA submission for approval of bardoxolone for the treatment of CTD-PAH.  No safety concerns to date.

Rationale for Bardoxolone Methyl in Pulmonary Arterial Hypertension Associated with Connective Tissue Disease

Bardoxolone methyl directly targetshave been reported by the bioenergetic and inflammatory components of PAH.  PAH patients experience mitochondrial dysfunction, increased NF-kB activity, and related inflammatory pathways involved in ROS-mediated signaling, cellular proliferation, and fibrosis.  Bardoxolone methyl, through the combined effect of Nrf2 activation and NF-kB suppression, has the potential to inhibit inflammatory and proliferative signaling, suppress ROS production and signaling, reduce the production of proteins related to fibrosis and tissue remodeling, and increase cellular respiration and ATP production.  Bardoxolone methyl targets multiple cell types relevant to PAH, including endothelial cells, smooth muscle cells, and macrophages.  Additionally, unlike current therapies, bardoxolone methyl does not cause systemic hemodynamic effects or drug-drug interactions in PAH patients.  Therefore, by addressing a novel pathway in PAH, we believe that bardoxolone methyl may provide additional benefits beyond current PAH therapies, including increased functional capacity, effects beyond functional improvements, broader applicability, and as a combination therapy.DSMB.

Market Opportunity for Bardoxolone Methyl in Pulmonary Arterial Hypertension Associated with Connective Tissue DiseaseCTD-PAH

We believe there is a significant opportunity for once-daily, orally administered bardoxolone methyl to address, not only the overall PAH market currently served only by the existing vasodilator therapies.  In 2015, global salestherapies but, significantly, CTD-PAH patients who receive limited efficacy and have a more severe form of approved PAH treatments were approximately $4.7 billion.  In addition, recently approved treatments such as Opsumit^®with high morbidity and Adempas^® have shown rapid uptake in the PAH market and, based on industry reports, Opsumit^® is projected to reach between $1 and $2 billion in annual sales within seven years from launch.mortality.  Based on literature and proprietary research, we believe there are approximately 12,000 CTD-PAH patients in the United States and 50,000 worldwide.  

Bardoxolone MethylRTA 1701 in Autoimmune Diseases

RTA 1701 is the lead product candidate from our proprietary series of RORγt inhibitors for the Treatmentpotential treatment of Other Pulmonary Hypertension Diseases

In additiona broad range of autoimmune, inflammatory, and fibrotic diseases.  RTA 1701 is an orally-bioavailable, RORγt-selective allosteric inhibitor that suppresses Th17 differentiation in vitro and demonstrates strong efficacy in rodent disease models of autoimmune disease.  RTA 1701 also potently suppresses the production of IL-17A, a clinically important cytokine, in human immune cells and when dosed orally to our Phase 3 trial in CTD-PAH, we are conducting LARIAT, an exploratory, dose-escalation Phase 2 trial evaluating the safety and efficacy of bardoxolone methyl in patients with PH due to interstitial lung disease (PH-ILD), including PH-ILD caused by sarcoidosis and idiopathic pulmonary fibrosis.  PH-ILD is a set of serious progressive diseases that ultimately lead to right ventricular heart failure and death.  There are no therapies currently approved for PH-ILD.  While approved vasodilators are sometimes used off-label, given the degree of remodeling and fibrosis present in the lung tissue and vasculature of PH-ILD patients, they are minimally effective.  Several current PAH therapies have been tested in PH-ILD patients and have resulted in little to no reproducible clinical improvement.  

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The primary endpoint of LARIAT is the change in 6MWD during a 16 week treatment period.  We have observed no significant tolerability issues in LARIAT to date.  The trial utilizes a protocol safety review committee (PSRC) that reviews all data, including SAE and AE data, on an unblinded basis to assess safety.  The PSRC has not reported any safety concerns to date, and top-line data are expected to be available in the first quarter of 2018.

Other Clinical Programs

In addition to our three lead programs, we are currently exploring a battery of additional programs in diseases that may include meaningful expansion opportunities.  Once we have received data on all of our earlier stage programs, we plan to evaluate all data to determine which indications to prioritize and move forward.

Omaveloxolone for the Treatment of Melanoma

We are evaluating omaveloxolone in the REVEAL trial, an open-label, multi-center, dose-escalation Phase 1b/2 trial to evaluate the safety, pharmacodynamics, and efficacy of omaveloxolone, in combination with existing immunotherapies in patients with unresectable or metastatic melanoma.  We completed enrollment of the trial and announced interim data from the Phase 1b portion of the trial, which showed an overall response rate observed in REVEAL of 8/30 (27%, 6 partial responses and 2 complete responses).  We have observed no significant tolerability issues in REVEAL to date. The REVEAL trial is being overseen by a PSRC that reviews all data, including SAE and AE data, to assess safety.  The PSRC has not reported any safety concerns in the trial to date.  We plan to complete our evaluation of data to determine next steps.  

RTA 901 for the Treatment of Orphan Neurological Indications

non-human primates.  We have conducted a Phase 1 clinical trial to evaluate the safety, tolerability, and pharmacokinetic profile of RTA 9011701 in healthy adult volunteers.  The trial was designed in two parts, part 1 with single ascending doses and part 2 with multiple ascending doses.  In part 1, 48 healthy subjects were randomized in a 3:1 ratio to receive a single dose of RTA 901 or placebo, respectively.  In part 2, 30 healthy subjects were randomized in a 4:1 ratio to receive 14 daily doses of RTA 901 or placebo, respectively.  We encountered noNo safety or tolerability issues,concerns were reported, and we observed an acceptable pharmacokinetic profile in the trial.

Our Hsp90 modulators, including RTA 901, are highly potent and selective C-terminal modulators of Hsp90.  Modulation of Hsp90 may induce expression of Hsp70, a molecular chaperone that plays a critical role in the process through which a protein assumes its functional shape and that serves as a central gatekeeperprofile.  We plan to continue development for mitochondrial protein import.  Mitochondria rely on Hsp70-dependent protein import mechanisms for almost all of their activity, including the production of ATP.  There are also indications that Hsp70 activation may play a profound role in neuroprotection since nerve cells are high consumers of ATP and rely on Hsp70-dependent protein import for proper mitochondrial function.  We have observed favorable activity of RTA 901 in a range of preclinical models of neurodegeneration and neuroprotection, including models of diabetic neuropathy, neural inflammation, and neuropathic pain.  RTA 901, administered orally once-daily, has been observed to rescue existing nerve function, restore thermal and mechanical sensitivity, and improve nerve conductance velocity and mitochondrial function in rodent disease models.

Preclinical Programs

RORgT Inhibitors

We are pursuing preclinical development of novel, small-molecule, orally bioavailable RORgT inhibitors.  RORgT is the master regulator of human T Helper 17 (Th17), cellular differentiation, function, and cytokine production, and represents a compelling target for a variety of autoimmune and inflammatory conditions.  Th17 cells produce cytokines, including IL-17, that play a critical role in driving immune-mediated inflammation and are implicated in the pathogenesis of certain autoimmune diseases.  The efficacy of suppressing IL-17 as a means of treating these conditions has been demonstrated both in animal models and in humans.  We have selected RTA 1701 in autoimmune, inflammatory, or fibrotic diseases. We retain all rights to advance towards a Phase 1 clinical trial.

Additional Nrf2 Activator Indications

If beneficial bioenergetic effectsour RORγt inhibitors, which are demonstrated in our ongoing CKD caused by Alport syndrome, FA, and CTD-PAH trials, this could indicate that our Nrf2 activator pharmacology may also provide therapeutic benefit for patients suffering from other diseases where mitochondrial dysfunction or chronic inflammation is implicated.  In addition, if therapeutic benefits are demonstrated in CKD caused by Alport syndrome, the Nrf2 activator pharmacology may also provide therapeutic benefit in other kidney diseases.  Some of these diseases may be treated by our current lead product candidates, bardoxolone methyl and omaveloxolone.

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Additional Hsp90 Modulator Indications

If beneficial neuroprotective and bioenergetic effects are demonstrated in our future Phase 2 trials, this could indicate that our Hsp90 modulator pharmacology may also provide therapeutic benefit for patients suffering from other diseases where neurodegeneration and mitochondrial dysfunction are implicated.not subject to any existing commercial collaborations.

Collaborations

KHKKKC Agreement

In December 2009, we entered into an agreement with KHK,KKC, under which we provided KHKKKC the right to develop and commercialize bardoxolone methyl for renal, cardiovascular, diabetes, and certain related metabolic indications in Japan, China (including Hong Kong and Macao), South Korea, Taiwan, Thailand, Singapore, Philippines, Malaysia, Indonesia, Brunei, Vietnam, Laos, Myanmar, and Cambodia.Cambodia (the KKC Agreement).  These indications include, among others, CKD and PH.PAH.  Total consideration under this agreement could reach $272.0 million in upfront and milestone payments, of which we have received $80.0 million.  Additionally, KKC is required to pay us royalties on net sales of licensed product sold by KKC, its affiliates, and sublicensees in its territory ranging from the low teens to the low 20% range depending on the country of sale and the amount of annual net sales.

KHKKKC is obligated to use commercially reasonable efforts to conduct all preclinical and clinical activities necessary for the commercialization of licensed products in each country in the licensed territory.  KHK is not participating in the development program for bardoxolone methyl in PH or other rare kidney diseases at this time but is reimbursing us the majority of the costs for our registrational trial in CKD caused by Alport syndrome in Japan.  Under this agreement, we are obligated to use commercially reasonable efforts to supply KHKKKC with clinical supply of licensed product required for KHK’sKKC’s development in the licensed territory, and we are obligated to negotiate and execute commercial supply agreements with KHK.KKC.  Also, KKC has allowed us to conduct clinical activities in PAH and certain rare forms of kidney disease in Japan and has reimbursed us the majority of the costs for CARDINAL in Japan and is paying for the costs of a certain number of patients as the in-country caretaker in FALCON in Japan.

Consideration under this agreement includes an upfront payment of $35 million, up to $97 million in development and regulatory milestone payments, and up to $140 million in commercial milestone payments.  Total consideration under this agreement could reach $272 million.  23

The aggregate amount of such consideration received through December 31, 2017, totals $50 million.  We expect to recognize $30 million in deferred revenue related to a milestone payment from KHK upon initiation of its Phase 3 trial in patients with type 2 diabetes and CKD in 2018.  Additionally, KHK is required to pay us royalties on net sales of licensed product sold by KHK, its affiliates, and sublicensees in its territory ranging from the low teens to the low 20 percent range depending on the country of sale and the amount of annual net sales.

The KHK agreementKKC Agreement will terminate automatically when the royalty term expires in all of KHK’sKKC’s territory.  A royalty term expires in a country on the later of the expiration of all patents in such country andor ten years after the first commercial sale in such country.  Either party may terminate the agreement upon the other party’s bankruptcy or insolvency or uncured material breach.  Additionally, KHKKKC may terminate the agreement at will upon advance written notice.  In the event of any termination of the agreement by us for KHK’sKKC’s uncured breach, bankruptcy, or insolvency or by KHKKKC at will, KHKKKC will transfer and assign to us the regulatory filings for bardoxolone methyl and will license to us the relevant trademarks used with the products in their respective territories.

AbbVieAmended and Restated License Agreement with AbbVie

In September 2010, we entered into a license agreement with AbbVie (the AbbVie License Agreement), under which we provided AbbVie, formerly known as Abbott Pharmaceuticals PR Ltd., the exclusive right to conduct all regulatory activities, including obtaining regulatory approval, and commercialization of bardoxolone methyl or other molecules for renal, metabolic, and cardiovascular indications, including CKD and PH,PAH, in all other countries outside the United States not previously licensed to KHKKKC under the KHK agreement.  Under this agreement we retain the right to commercialize bardoxolone methyl in the United States.  Also, both parties are obligated to use commercially reasonable efforts to develop bardoxolone methyl in accordance with agreed upon development plans.

Under this agreement, AbbVie is required to pay us consideration in the form of an upfront payment and development and commercial milestone payments.  For each of the three licensed indications under this agreement, we are eligible to receive up to either $300 million or $350 million in development, regulatory and commercial milestone payments depending on the licensed indication and the number of compounds to achieve such milestones, however, these payments may only be made once per molecule developed.  The aggregate amount of such consideration received through December 31, 2017 totaled $300 million, with a potential $50 million milestone related to commercial sales remaining.  Additionally, AbbVie is required to pay us, under the AbbVie license agreement, tiered royalties on net sales of licensed product sold by AbbVie, its affiliates and sublicensees in its territory ranging from 15 percent to the high 20 percent range depending on the amount of annual net sales.

At present, AbbVie has exercised their opt-out right with regard to CTD-PAH and PH-ILD and has not opted in to the development program in CKD caused by Alport syndrome or other rare kidney diseases, and therefore is not co-funding our development programs in these indications.  AbbVie has the right to opt-in to these programs at any time during development.  Upon opting-in, AbbVie would be required to pay an agreed upon amount of all development costs accumulated up to the point of exercising their opt-in right.  All development costs incurred after AbbVie’s opt-in would be split equally.

The AbbVie license agreement will terminate automatically when the royalty term expires in all countries in AbbVie’s territory.  The royalty term expires in a country on the later to occur of (i) the expiration of all patents and regulatory exclusivity, unless prior to such

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expirations generic sales have exceeded a certain percentage of all sales in a quarter, and (ii) ten years after the first commercial sale.  Either party may terminate the agreement in its entirety for bankruptcy or insolvency of the other party and in its entirety or with respect to specific territories for an uncured material breach by the other party, and AbbVie may terminate the agreement in its entirety for specified reasons for cause and in its entirety or with respect to specified territories at will upon advance written notice.  In the event of any termination of the agreement by us for AbbVie’s breach or by AbbVie for cause or at will, AbbVie will license to us certain intellectual property rights to develop, manufacture and commercialize bardoxolone methyl, transfer and assign to us the regulatory filings for bardoxolone methyl and will assign or license us the relevant trademarks used with the products in their respective territories.  Under certain terminations under the AbbVie license agreement, we are also obligated to pay reverse royalties on net sales of bardoxolone methyl in the terminated territory.

AbbVie Collaboration AgreementKKC Agreement.  

In December 2011, we entered into a collaboration agreement with AbbVie (the Collaboration Agreement) under which we provided AbbVie the right to jointly research, develop, and commercialize all second- and later-generation Nrf2 activators for all indications other than renal, cardiovascular, and metabolic indications.  This is a multi-molecule, multi-product collaboration across all indications, other than renal, cardiovascular, and metabolic indications that are covered in our bardoxolone methyl license agreement with AbbVie and our agreement with KHK.  PursuantKKC.  

In October 2019, we entered into an Amended and Restated License Agreement with AbbVie (the Reacquisition Agreement), under which we reacquired the development, manufacturing, and commercialization rights concerning our proprietary Nrf2 activator product platform originally licensed to AbbVie under the AbbVie License Agreement and the Collaboration Agreement. Under the Reacquisition Agreement, the AbbVie collaboration agreement,License Agreement and the parties haveCollaboration Agreement were amended, resulting in AbbVie granting its exclusive sublicenses back to us, such that we reacquired the worldwide rights to bardoxolone, excluding certain Asian countries previously licensed to KKC, and the worldwide rights to omaveloxolone and the second-generation activators.  In exchange for such rights, we agreed to spend up topay AbbVie a certain amounttotal of $330.0 million, of which we paid $100.0 million in early development costs which include research, preclinical development and clinical development, with us paying 100% of a certain amount of such costsDecember 2019, and the remaining costs being shared equally.  For jointly developed products, all otherremainder is payable in installments of $150.0 million on June 30, 2020, and $80.0 million on November 30, 2021. In addition, AbbVie will receive an escalating, low single-digit royalty on worldwide costs are split equallynet sales, on a product-by-product basis, of omaveloxolone and worldwide profits are also split equally except for any product designated for an indication for which Humira^®, a drug marketedcertain next-generation Nrf2 activators.  AbbVie will not receive royalties on bardoxolone sales.  By reacquiring our rights, we were relieved from our obligations under the AbbVie License Agreement and sold bythe Collaboration Agreement.

After the $330.0 million has been paid to AbbVie, has received regulatory approval in the United States, the European Union, or Japan, in which case the costs and profits will be assumed 70% bylicenses granted to AbbVie and 30% by us.  Multiple indications can be developed for a single molecule subjectthe sublicenses granted to certain limitations.  Upon conclusion of a Phase 2 trial for a given molecule in a given indication, either party may nominate the molecule as a product candidate, as defined in the agreement specifying the lead indication to advance for a given molecule.

Jointly developed products are developed under agreed development plans and budgets and both parties are obligated to use commercially reasonable efforts to perform their respective obligations under such plans.  Withus with respect to omaveloxolone we areand certain next-generation Nrf2 activators will be terminated, with all rights reverting to us, and, if (or when) 18 months has elapsed since the lead development partyexecution of the Reacquisition Agreement, the licenses granted to AbbVie and the lead regulatory party globally.  Manufacturing responsibilities during development are allocated between the parties pursuantsublicenses granted to the agreed development plans.  AbbVie will serve as the lead manufacturing party for commercial supply in all jointly developed omaveloxolone indications.

With respect to joint development, commercialization territory rights are divided on a molecule-by-molecule basis.  We have the primary right to commercialize omaveloxolone in the United States, and AbbVie has the primary right to commercialize omaveloxolone in the rest of world, with exclusive commercialization rights in Japan.  For subsequent product candidates, we retain the rights to at least one major market, although the first choice alternates between the collaboration parties as each new molecule is commercialized.

Products may be unilaterally developed by a party with the other party being entitled to opt-out of, and back into, development cost sharing and profit sharing at various stages of development.  The developer would serve as the lead development, regulatory, and manufacturing party.  The developer has the right to commercialize in all territories and must pay a royalty to the nonparticipating party ranging from the low single digits to 20%, depending principally on what stage of development, if any, was funded by the nonparticipating party.  In September 2016, we and AbbVie mutually agreed that we would continue unilateral development of omaveloxolone.  Therefore, AbbVie no longer co-funds the exploratory development costs of this program, but retains the right to opt back in at certain points in development.  Depending upon what point, if any, AbbVie opts back into development, AbbVie may retain its right to commercialize a product outside the United States, or we may be responsible for commercializing the product on a worldwide basis.  Upon opting back in, AbbVie would be required to pay an agreed upon amount of all development costs accumulated up to the point of exercising their opt-in right, after which development costs incurred and product revenue worldwide would be split equally.

The AbbVie collaboration agreement will continue in effect until both parties mutually agree to terminate the agreement.  Upon any uncured material breach under the AbbVie collaboration agreementus with respect to a joint product, the non-breaching partybardoxolone, also will have the rightbe terminated, with all rights reverting to continueus.

Competition

The development and commercialization of such product at its own costnew pharmaceutical products is highly competitive.  Our future commercial success depends on our ability to achieve and maintain all profits from such product unlessa competitive advantage.  We are aware of several advanced drug development programs in the breaching party opts-in to continue developmentrare forms of CKD for which we are developing bardoxolone and pays a specified opt-in payment.in FA for which we are developing omaveloxolone.

Payments to us under this agreement include a $400 million upfront payment that was received upon execution of the AbbVie collaboration agreement, $1.4 million24

Bardoxolone in shared development costs prior to our continuing development of omaveloxolone unilaterally, and potential future payments including development cost reimbursement, profit share, and royalty payments.

Competition

Bardoxolone Methyl in Chronic Kidney DiseaseCKD Caused by Alport Syndrome

If bardoxolone methyl isCurrently, there are no approved therapies for the treatment of patients with CKD caused by Alport syndrome, and patients are commonly treated off-label with ACE inhibitors or ARBs.  If bardoxolone is approved and launched commercially, it will likely be the first treatment on the market forin the indication.  At leastUnited States.  We are aware of one therapy, RG-012 (lademirsen), developed by Sanofi S.A., which is in Phase 2 clinical development for patients with CKD caused by Alport syndrome.  Additionally, several inhibitors of the sodium-glucose cotransporter-2 protein, such as Jardiance®, developed by Boehringer Ingelheim, and Farxiga®, developed by AstraZeneca, are in development for inflammatory and inherited forms of CKD.

Bardoxolone in CKD Caused by ADPKD

Currently, there is one drug approved and multiple therapies in late-stage clinical development for the treatment of Alport syndromeADPKD.  In 2018, Otsuka Pharmaceuticals Co., Ltd. received approval by the FDA to market JYNARQUE® to slow kidney function decline in adults at risk of rapidly progressing ADPKD.  Additional therapies reported to be in clinical development include venglustat, which is currently in Phase 3 clinical development with aby Sanofi Genzyme, tesevatinib, which is in Phase 2 injectable product candidate, RG-012,clinical development by Kadmon Holdings, Inc., and lixivaptan from Regulus Therapeutics.Palladio Biosciences, which is expected to launch pivotal studies early in 2020.

20Bardoxolone in CKD Caused by IgAN

There are currently no therapies approved for IgAN, and patients are commonly treated off-label with ACE inhibitors, ARBs, or immunosuppressant therapy.  We are aware of multiple drugs in advanced clinical development for IgAN, including OMS-721, nefecon, and sparsentan, which are in Phase 3 clinical development by Omeros Corporation, Calliditas Therapeutics AB, and Retrophin, Inc., respectively.  Additionally, we are aware of multiple Phase 2 clinical development programs including LNP023, IONIS-FB-LRx, cemsdisiran, AVB-S6-500, atacicept, and APL-2 by Novartis AG, Ionis Pharmaceuticals, Alnylam Pharmaceuticals, Aravive, Inc, Merck KGaA, and Apellis Pharmaceuticals Inc., respectively.

Bardoxolone in CKD Caused by FSGS

There are currently no therapies approved for FSGS, and patients are commonly treated off-label with ACE inhibitors, ARBs, or immunosuppressant therapy.  There are multiple drugs in advanced clinical development for FSGS, including sparsentan, which is in Phase 3 clinical development by Retrophin, Inc., and CCX140, CXA-10, DMX-200, voclosporin, PF-06730512, and abatacept, which are reported to be in Phase 2 clinical development by ChemoCentryx, Inc., Complexa, Inc., Dimerix Bioscience Ltd., Aurinia Pharmaceuticals Inc., Pfizer Inc., and Bristol-Myers Squibb Company, respectively.  

Bardoxolone in CKD Caused by T1D CKD

There are currently no therapies approved to treat T1D CKD, and patients are commonly treated off-label with ACE inhibitors or ARBs. There are multiple programs in advanced clinical development, including Jardiance®, which is in Phase 3 development by Boehringer Ingelheim and Eli Lilly and Company, GKT831, which is in Phase 2 clinical development by GenKyoTex SA, and Farxiga®, in development by AstraZeneca, which received fast track designation in August, 2019, for delaying the progression of renal failure and preventing cardiovascular and renal death in patients with CKD.  It is likely that Invokana® will also be developed for type 1 diabetic nephropathy.  Invokana® is developed by Mitsubishi Tanabe Pharma Corporation and Janssen Pharmaceuticals and was recently approved for the treatment of patients with type 2 diabetes and diabetic nephropathy.

Omaveloxolone in Friedreich’s AtaxiaFA

There are currently no therapies approved for FA.  If omaveloxolone is approved for the treatment of FA, it has the potential to be the first treatment on the market for this indication, but it currently faces pipeline competition.  Pipeline competition for this orphan disease results in competition for patient recruitment as well as investigators’ time and resources.  SeveralThe only program in Phase 3 stage of development is Retrotope Inc.’s study of RT001, which launched in January 2020.  The remaining competitor product candidates are in Phase 1 or 2 clinical development

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for FA, including TAK831, epicatechin, RT001,MIN-102, vatiquinone, CTI-1601, and JOT101 from Takeda Pharmaceutical Company Limited, CarderoMinoryx Therapeutics, Inc., Retrotope Inc.,BioElectron Technology Corporation, Chondrial Therapeutics, and Jupiter Orphan Therapeutics, Inc., respectively.  Biohaven’s Troriluzole is in Phase 3 development for the treatment of patients with spinocerebellar ataxia (SCA).  Biohaven intends to explore the development of Troriluzole for other ataxias, including FA pending the outcome of the ongoing clinical studies in SCA.

Bardoxolone Methyl in Pulmonary Arterial Hypertension Associated with Connective Tissue DiseaseCTD-PAH

There are currently no therapies approved specifically for CTD-PAH.  If bardoxolone methyl is approved for the treatment of patients with PAHCTD-PAH for use in conjunction with currently approved therapies for PAH, such as ERAs, prostacyclins, and phosphodiesterase type 5 (PDE5),PDE-5 inhibitors, it will face competition with those current treatments such as macitentan, marketed by Actelion Pharmaceuticals US, Inc. (Actelion) as Opsumit^®Opsumit®; riociguat, marketed by Bayer AG (Bayer) as Adempas^®Adempas®; oral treprostinil, marketed by United Therapeutics Corporation as Orenitram^™Orenitram®; ambrisentan, marketed by Gilead Sciences, Inc. (Gilead) as Letairis^®Letairis®; selexipag, marketed by Actelion as Uptravi^®Uptravi®; and bosentan, marketed by Actelion as Tracleer^®Tracleer®.  Patients with PAH frequently use more than one therapy; however, we may face competition for patients’ willingness and resources to add another clinical therapy.

We may also face competition from potential new therapies in development.  For example, Arena Pharmaceuticals, Inc., Gilead,Bayer AG, Bial-Portela & C^a.,Ca. SA, Biogen, F. Hoffmann-La Roche Ltd, and Karos Pharmaceuticals, Inc.Merck & Co Inc are actively developing compounds that are attempting to address a problem outside of vasodilation and are to be used or allow use in combination with existing treatments.  Their products appear to be in early clinical development.  We consider these our most direct competitors.

Manufacture and Supply

We have historically reliedrely on multiple third-party manufacturers and on our collaborators for the manufacture of our product candidates for preclinical and clinical testing, as well as for planned commercial manufacture if our product candidates receive marketing approval.  Under unilateral development of our product candidates, we are responsible for manufacturing, and we expect to continue to rely on multiple third-party manufacturers.  We believe there are multiplereliable sources for all of the materials required for the manufacture of our product candidates.  Our manufacturing strategy enables us to more efficiently direct financial resources to the research, development, and commercialization of product candidates rather than diverting resources to internally develop manufacturing facilities.  As our product candidates advance through development, we expect to enter into longer-term commercial supply agreements with key suppliers and manufacturers and continue to strategically build redundancy in suppliers to fulfill and secure the ongoing and planned preclinical, clinical, and, if our product candidates are approved for marketing, our commercial supply needs for ourselves and our collaborators.

Manufacturing Preparations for Bardoxolone in Rare CKD

Our manufacturing and quality teams are in place for the current stage of program development with plans to grow as needed to support commercial supply and distribution of bardoxolone, a small molecule drug product to be administered orally.  We are on track for planned NDA and commercial launch drug supplies, with an identified supply chain to adequately support near-term clinical and commercial demand.  We have completed process validation batches for drug substance and registration batches for drug product.  A three-year, room temperature shelf life is currently established for clinical-image bardoxolone capsules at multiple doses, which is anticipated to reflect commercial product.  In addition, we believe that the synthesis from regulatory starting material to drug substance can be manufactured at scale, resulting in a commercially competitive cost of goods.

Manufacturing Preparations for Omaveloxolone in Neurological Diseases

Our manufacturing and quality teams are in place for the current stage of program development with plans to grow as needed to support commercial supply and distribution of omaveloxolone, a small molecule drug product to be administered orally.  We are on track for planned NDA and commercial launch drug supplies, with an identified supply chain to adequately support near-term clinical and commercial demand.  We have completed registration batches for drug substance and drug product.  A three-year, room temperature, shelf life has been established for clinical-image omaveloxolone capsules at the target commercial dose.  In addition, we believe that the synthesis

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from regulatory starting material to drug substance can be manufactured at scale, resulting in a commercially competitive cost of goods. 

Sales and Marketing

We currently intend to buildare in the process of building the commercial infrastructure in the United States necessary to effectively support the commercialization of all of our product candidates if and when we believe regulatory approval of the first of such product candidates in the United States appears imminent.  

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 KKC has all rights to commercialization in its territories. We are refining our strategy and market assessments with respect to a potential launch in the EU, and we plan to continue to evaluate market opportunities for our products in other global markets.

Commercial infrastructure for orphan products typically consists of a targeted, specialty sales force that calls on a limited and focused group of physicians supported by sales management, medical liaisons, internal sales support, an internal marketing group, and distribution support.  One challenge unique to commercializing therapies for rare diseases is the difficulty in identifying eligible patients 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.

Additional capabilities important to the orphan marketplace include the management of key accounts such as managed care organizations, group-purchasing organizations, specialty pharmacies, and government accounts.  To develop the appropriate commercial infrastructure, we will have to invest significant amounts of financial and management resources, some of which will be committed prior to any confirmation that any of our product candidates will be approved.

OutsideSales and Marketing Preparations for Bardoxolone in Rare CKD

We are in the process of preparing for a potential commercial launch of bardoxolone in Alport syndrome in the United States.  Our ability to launch bardoxolone is dependent on the successful filing and defense of an NDA and approval by the FDA.  We have hired commercial leaders, and we are building the teams, infrastructure, systems, and processes necessary for the launch of bardoxolone in the United States, where appropriateincluding sales, marketing, market access, patient support, and dependingdistribution.  Additionally, we are expanding quality and compliance functions to support commercialization.

If we receive approval for bardoxolone in Alport syndrome, 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 have completed preliminary field force sizing and structure for sales and access teams.  The trade naming process is underway. We have launched disease awareness campaigns to educate physicians about Alport syndrome.

Sales and Marketing Preparations for Omaveloxolone in FA

We are also in the process of preparing for a potential commercial launch of omaveloxolone in FA in the United States.  Our ability to launch omaveloxolone is dependent on the termssuccessful filing and defense of an NDA and approval by the FDA.  We have hired commercial leadership and are building the teams, infrastructure, systems, and processes necessary for the launch of omaveloxolone in the United States, including in sales, marketing, market access, patient support, and distribution.  Additionally, we are expanding quality and compliance functions to support commercialization.

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If we receive approval for omaveloxolone in FA, 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 have completed preliminary field force sizing and structure for sales and access teams.  The trade naming process is underway.  We have launched disease awareness campaigns to educate physicians about FA.

Medical Affairs

Our medical affairs activities grew in 2019 and are expected to continue to grow in 2020.  Regarding our CKD program, our medical science liaisons (MSLs) are actively engaged in educating the nephrology community on the hallmarks of Alport syndrome.  A focus of our contractual arrangements,education efforts is the importance of genetic testing in reducing the meaningful misdiagnosis rate for patients with Alport syndrome. Our KidneyCode™ initiative provides free access to genotyping against 17 CKD-relevant genes. In neurological disease, we plan, either alone,are increasing our efforts to educate physicians on the hallmarks of FA and the differentiating symptoms that discriminate patients with our strategic collaborators AbbVie and KHK, orFA from patients with new collaboration partners, to assist in the commercialization of our products.  In certain instances, we may consider building our own commercial infrastructure.similar neurological diseases.

Government Regulation

The clinical testing, manufacturing, labeling, storage, distribution, record keeping, advertising, promotion, import, export, and marketing, among other things, of our product candidates are subject to extensive regulation by governmental authorities in the United States and other countries.  The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources.  Failure to comply with the applicable requirements at any time during the product development process, approval process, or after approval may subject an applicant and sponsor to a variety of administrative or judicial sanctions, including refusal by the applicable regulatory authority to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and other types of letters, product recalls, product seizures, total or partial

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suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal investigations and penalties brought by the FDA and the Department of JusticeDOJ or other governmental entities.

United States Product Approval Process

In the United States, the FDA regulates drugs under the Federal Food, Drug and Cosmetic Act.Act (FFDCA).  Pharmaceutical products are also subject to regulation by other governmental agencies, such as the Federal Trade Commission (FTC), the Office of Inspector General (OIG) of the U.S.United States Department of Health and Human Services, the Consumer Product Safety Commission, the Environmental Protection Agency,EPA, and the Department of Justice.DOJ.  The steps required before a drug may be approved for marketing in the United States generally include:

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The testing and approval process requires substantial time, effort, and financial resources, and the receipt and timing of any approval is uncertain.

Preclinical studies include laboratory evaluations and animal studies to assess the potential safety and efficacy of the product candidate.  Preclinical studies must be conducted in compliance with FDA regulations regarding GLPs.  The results of the preclinical studies, together with manufacturing information and analytical data, are submitted to the FDA as part of the IND, which includes a protocol detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated if the clinical trial lends itself to an efficacy determination.  The IND will become effective automatically 30 days after receipt by the FDA, unless the FDA raises concerns or questions about the conduct of the studies as outlined in the IND prior to that time.  In this case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can proceed.  The IND must become effective before clinical trials may be commenced.

Clinical trials involve the administration of the product candidates to healthy human volunteers or patients with the disease to be treated under the supervision of a qualified principal investigator.  Clinical trials must be conducted under the supervision of one or more qualified principal investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial, and in accordance with protocols detailing the objectives of the applicable phase of the trial, dosing procedures, research subject selection and exclusion criteria, and the safety and effectiveness criteria to be evaluated.  Progress reports detailing the status of clinical trials must be submitted to the FDA annually.  Sponsors must also report in a timely manner to the FDA SAEs and unexpected AEs, any clinically important increase in the rate of serious suspected adverse eventsAEs over that listed in the protocol or investigator’s brochure, or any findings from other studies or tests that suggest a significant risk in humans exposed to the product candidate.  Further, the protocol for each clinical trial must be reviewed and approved by an IRB, either centrally or individually at each institution at which the clinical trial will be conducted.  The IRB will consider, among other things, ethical factors, and the safety of human subjects, and the possible liability of the institution.

Clinical trials are typically conducted in three sequential phases prior to approval, but the phases may overlap or be combined and different studies may be initiated with the same drug candidate within the same phase of development in similar or different patient populations.  These phases generally include the following:

Phase 1.  Phase 1 clinical trials represent the initial introduction of a product candidate into human subjects, frequently healthy volunteers.  In Phase 1, the product candidate is usually tested for pharmacodynamicsPD and pharmacokineticPK properties such as safety (including adverse effects), dosage tolerability, absorption, distribution, metabolism, and excretion.

Phase 2.  Phase 2 clinical trials usually involve a limited patient population to (1) preliminarily evaluate the efficacy of the product candidate for specific indications, (2) determine dosage tolerability and optimal dosage, and (3) identify possible adverse effects and safety risks.

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Phase 3.  If a product candidate is found to be potentially effective and to have an acceptable safety profile in Phase 2 trials, the clinical trial program may be expanded to Phase 3 clinical trials to further evaluate clinical efficacy, optimal dosage, and safety within an expanded patient population at geographically dispersed clinical trial sites.

Phase 4.  Phase 4 clinical trials may be conducted after approval to gain additional experience from the treatment of patients in the intended therapeutic indication and to document a clinical benefit in the case of drugs approved under accelerated approval regulations, or when otherwise requested by the FDA in the form of post-market requirements or commitments.  Failure to promptly conduct any required Phase 4 clinical trials could result in withdrawal of approval.

Pursuant to the 21^st Century Cures Act, theThe manufacturer of an investigational drug in a Phase 2 or Phase 3 clinical trial for a serious or life-threatening disease is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for expanded access.

A pivotal trial is an adequate and well-controlled clinical trial that permits the FDA to evaluate the overall benefit-risk relationship of the drug and to provide adequate information for labeling of the drug.  In most cases, the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the efficacy of the drug.  A

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single Phase 3 trial with other confirmatory evidence may be sufficient in rare instances, including (1) where the trial is a large multicenter trial demonstrating internal consistency and a statistically very persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity, or prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or ethically impossible.impossible or (2) in conjunction with confirmatory evidence.  The FDA may accept results from Phase 2 trials as pivotal if the trial design provides a well-controlled and reliable assessment of clinical benefit, particularly in situations where there is an unmet medical need and the results are sufficiently robust.

The FDA, the IRB, or the clinical trial sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk.  Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring boardDSMB or committee.  This group determines whether or not a trial may move forward at designated check points based on access to certain data from the trial.  A clinical trial sponsor may also suspend or terminate a clinical trial based on evolving business objectives or competitive climate.

The clinical trial process can take three to ten years or more to complete, and there can be no assurance that the data collected will support FDA approval or licensure of the product.

The results of preclinical studies and clinical trials, together with detailed information on the manufacture, composition, and quality of the product candidate, are submitted to the FDA in the form of an NDA requesting approval to market the product.  The application must be accompanied by a significant user fee payment, currently $2.4approximately $2.9 million for fiscal year 2018.2020.  The FDA has substantial discretion in the approval process and may refuse to accept any application or decide that the data are insufficient for approval and require additional preclinical, clinical, or other studies.

Review of Application

Once the NDA submission has been accepted for filing, which occurs, if at all, 60 days after submission, the FDA informs the applicant of the specific date by which the FDA intends to complete its review.  This is typically 12 months from the date of submission.  The review process is often extended by the FDA as a result of submission of additional information, sometimes at the FDA’s request, during the review.  The FDA reviews NDAs to determine, among other things, whether the proposed product is safe and effective for its intended use and whether the product is being manufactured in accordance with CGMP to assure and preserve the product’s identity, strength, quality, and purity.  Before approving an NDA, the FDA may inspect the facilities at which the product is manufactured and will not approve the product unless the manufacturing facility complies with CGMPs.  The FDA will also inspect clinical trial sites for integrity of data supporting safety and efficacy.  During the approval process, the FDA also will determine whether a Risk Evaluationrisk evaluation and Mitigation Strategymitigation strategy (REMS) is necessary to assure the safe use of the product.  If the FDA concludes a REMS is needed, the sponsor of the application must submit a proposed REMS; the FDA will not approve the application without an approved REMS, if required.  A REMS can substantially increase the costs of obtaining approval.  The FDA may also convene an advisory committee of external experts to provide input on certain review issues relating to risk, benefit, and interpretation of clinical trial data.  The FDA may delay approval of an NDA if applicable regulatory criteria are not satisfied or the FDA requires additional testing or information.  The FDA may require post-marketing testing and surveillance to monitor safety or efficacy of a product.  The FDA will issue either an approval of the NDA or a Complete Response Letter detailing the deficiencies and information required for reconsideration of the application.

Disclosure of Clinical Trial Information

Sponsors of clinical trials of FDA regulated products are required to register and disclose certain clinical trial information.  Information related to the product, patient population, phase of investigation, trial sites and investigators, and other aspects of the clinical trial is then made public as part of the registration.  Sponsors are also obligated to discuss the results of their clinical trials after completion.  Disclosure of the results of these trials can be delayed in certain circumstances for up to two years after the date of completion of the trial.  Competitors may use this publicly available information to gain knowledge regarding the progress of development programs.

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The Orphan Drug Act

Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition—generally a disease or condition that affects fewer than 200,000 individuals in the United States.  Orphan drug designation must be requested before submitting an NDA.  After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA.  Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.  The first NDA applicant to receive FDA approval for a particular active ingredient to treat a particular disease with FDA orphan drug designation is entitled to a seven-year exclusive marketing period in the United States for that product, for that indication.  During the seven-year exclusivity period, the FDA may not approve any other applications to market the same drug for the same disease, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity.  Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition.  Among the other benefits of orphan drug designation are tax credits (Credits) for certain research and a waiver of the NDA application user fee.

Pediatric Exclusivity and Pediatric Use

Under the Best Pharmaceuticals for Children Act, certain drugs may obtain an additional six months of exclusivity in an indication, if the sponsor submits information requested in writing by the FDA in what is known as a Written Request, relating to the use of the active moiety of the drug in children.  The FDA may not issue a Written Request for studies on unapproved or approved indications where it determines that information relating to the use of a drug in a pediatric population, or part of the pediatric population, may not produce health benefits in that population.

To receive the six-month pediatric market exclusivity, a sponsor would have to receive a Written Request from the FDA and conduct the requested studies in accordance with a written agreement with the FDA.  If there is no written agreement, studies would be conducted in accordance with commonly accepted scientific principles, and reports submitted of those studies.  A Written Request may include studies for indications that are not currently in the labeling if the FDA determines that such information will benefit the public health.  The FDA will accept the reports upon its determination that the studies were conducted in accordance with and are responsive to the original Written Request, agreement, or commonly accepted scientific principles, as appropriate, and that the reports comply with the FDA’s filing requirements.

In addition, the Pediatric Research Equity Act (PREA), requires a sponsor to conduct pediatric studies for most drugs, for a new active ingredient, new indication, new dosage form, new dosing regimen, or new route of administration.  Under PREA, original NDAs and supplements thereto must contain a pediatric assessment unless the sponsor has received a deferral or waiver.  The required assessment must include the evaluation of the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective.  The FDA, on its own initiative or at the request of the sponsor, may defer pediatric trial requirements for some or all of the pediatric subpopulations.  A deferral may be granted by the FDA if it believes that additional safety or effectiveness data in the adult population need to be collected before the pediatric studies begin.  The FDA must send a non-compliance letter to any sponsor that fails to submit the required assessment, keep a deferral current, or fails to submit a request for approval of a pediatric formulation.  Unless otherwise required by regulation, PREA generally does not apply to a drug for an indication for which orphan designation has been granted; however, beginning in 2020, PREA will apply to NDAs for orphan-designated drugs if the drug is a molecularly targeted cancer product intended for the treatment of an adult cancer and is directed at a molecular target that the FDA has determined is substantially relevant to the growth or progression of a pediatric cancer.

Breakthrough Therapy Designation

The FDA is required to expedite the development and review of the application for approval of drugs that are intended to treat a serious or life-threatening disease or condition where preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints.  Under the breakthrough therapy program, the sponsor of a new drug candidate may request that the FDA

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designate the drug candidate for a specific indication as a breakthrough therapy concurrent with, or after, the filing of the IND for the drug candidate.  The FDA must determine if the drug candidate qualifies for breakthrough therapy designation within 60 days of receipt of the sponsor’s request.

Expedited Review and Accelerated Approval Programs

A sponsor may seek approval of its product candidate under programs designed to accelerate the FDA’s review and approval of NDAs.  For example, Fast Track Designation may be granted to a drug intended for treatment of a serious or life-threatening disease or condition that has potential to address unmet medical needs for the disease or condition.  The key benefits of fast track designation are rolling review (submission of portions of an application before the complete marketing application is submitted), and accelerated approval or approval on the basis of a surrogate endpoint, if relevant criteria are met.

Under the accelerated approval program, the FDA may approve an NDA on the basis of either a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments.  Post-marketing studies or completion of ongoing studies after marketing approval are generally required to verify the drug���sdrug’s clinical benefit in relationship to the surrogate endpoint or ultimate outcome in relationship to the clinical benefit.

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Based on results of the Phase 3 clinical trial(s) submitted in an NDA, upon the request of an applicant, the FDA may grant the NDA a priority review designation, which sets the target date for FDA action on the application at eight months after the NDA submission.  Priority review is granted where there is evidence that the proposed product would be a significant improvement in the safety or effectiveness of the treatment, diagnosis, or prevention of a serious condition.  If criteria are not met for priority review, the application is subject to the standard FDA review period of twelve months after NDA submission.  Priority review designation does not change the scientific/medical standard for approval or the quality of evidence necessary to support approval.

Post-Approval Requirements

Even after approval, drugs manufactured or distributed pursuant to FDA approvals are subject to continuous regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product distribution, advertising and promotion, and reporting of adverse experiences with the product.  After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval.  There also are continuing annual user fee requirements for any marketed products and the establishments at which such products are manufactured, as well as new application fees for supplemental applications with clinical data.products.

The FDA may impose a number of post-approval requirements as a condition of approval of an NDA.  For example, the FDA may require post-marketing testing, including Phase 4 clinical trials, and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.

In addition, entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with CGMP requirements.  Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented.  FDA regulations also require investigation and correction of any deviations from CGMP and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use.  Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain CGMP compliance.

Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market.  Later discovery of previously unknown problems with a product, including AEs of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may also result in revisions to the

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approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program.  Other potential consequences include, among other things:

The FDA strictly regulates marketing, labeling, advertising, and promotion of drug products that are placed on the market.  Drugs may be promoted only for the approved indications and in accordancea manner consistent with the provisions of the approved label.labeling.  The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.

Prescription Drug Marketing Act (PDMA) and Drug Supply Chain Security Act (DSCSA)

The distribution of pharmaceutical products is subject to the Prescription Drug Marketing Act (PDMA),PDMA, which regulates the distribution of drugs and drug samples at the federal level and sets minimum standards for the registration and regulation of drug distributors at the state level.  Under the PDMA and state law, states require the registration of manufacturers and distributors who provide pharmaceuticals in that state.  It also requires state including in certain stateslicensing of manufacturers and distributors that ship pharmaceuticals into the state even if such manufacturers or distributors have no place of business within the state.  The PDMA and state laws impose requirements and limitations uponon drug sampling to ensure accountability in the distribution of samples.  The PDMA sets forth civil and criminal penalties for violations of these and other provisions.

The federal Drug Supply Chain Security Act (DSCSA),DSCSA, signed in tointo law on November 27, 2013, imposes new obligations on manufacturers of pharmaceutical products, among others, related to product tracking and tracing, identification, verification, and other elements.  Among the requirements of this federal legislation, manufacturers will beare required to provide certain information regarding the drug

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product to individuals and entities to which product ownership is transferred, label drug product with a product identifier (i.e., serialization) in order to establish an electronic interoperable prescription product system to identify and trace certain prescription drugs distributed in the United States, and keep certain records regarding the drug product.  Further, under this legislation,the DSCSA, manufacturers will have drug product investigation, quarantine, disposition, and notification responsibilities related to counterfeit, diverted, stolen, and intentionally adulterated products, as well as products that are the subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious health consequences or death.  These requirements are being phased in over a ten-year period.period, and some requirements are already in effect.  The DSCSA replaced the prior drug “pedigree” requirements under the PDMA and preempts existing state drug pedigree laws and regulations.  The DSCSA also establishes new requirements for the licensing of wholesale distributors and third-party logistic providers.  These licensing requirements preempt states from imposing licensing requirements that are inconsistent with, less stringent than, directly related to, or otherwise encompassed by standards established by the FDA pursuant to the DSCSA.  Until the FDA promulgates regulations to address the DSCSA’s new national licensing standard,standards for wholesalers, current state licensing requirements typically remain in effect.effect, although the DSCSA expressly preempts those state statutes and regulations that require third-party logistics providers to maintain wholesale drug distributor licenses.

Federal and State Fraud and Abuse and Data Privacy and Security and Transparency Laws and Regulations

In addition to FDA restrictions on marketing of pharmaceutical products, federal and state healthcare laws and regulations restrict certain business practices in the biopharmaceutical industry.  These laws include, but are not limited to, anti-kickback, false claims, data privacy and security, and transparency statutes and regulations.

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The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting, or receiving remuneration, directly or indirectly, to induce, or in return for, purchasing, leasing, ordering, or arranging for the purchase, lease, or order of any good, facility, item, or service reimbursable under Medicare, Medicaid, or other federal healthcare programs.  The term “remuneration” has been broadly interpreted to include anything of value, including, for example, gifts, discounts, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of payment, ownership interests, and providing anything at less than its fair market value.  The federal Anti-Kickback Statute has been interpreted to apply to certain arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers on the other.  Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and our practices may not in all cases meet all of the criteria for a statutory exception or safe harbor protection.  Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases, or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor.  Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the federal Anti-Kickback Statute.  Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances.  Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the statute has been violated.  The intent standard under the federal Anti-Kickback Statute was amended by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the PPACA)(PPACA) to a lower intent standard such that a person or entity no longer needs to have actual knowledge of this statute or the specific intent to violate it to have committed a violation.  In addition, the PPACA codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act (discussed below).  Further, civil monetary penalties statutes impose penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.

The federal false claims laws, including the federal civil False Claims Act, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment or approval to the federal government or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government.  As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property presented to the U.S.United States government.  Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for, among other things, allegedly providing free product to customers with the expectation that the customers would bill federal healthcare programs for the product.  Other pharmaceutical companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of the product for unapproved, and thus non-reimbursable, uses.  The federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), created additional federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payerspayors and knowingly and willfully falsifying, concealing, or covering up a material fact, or making any materially false, fictitious, or fraudulent statement in connection with the delivery of, or payment for, healthcare benefits, items, or services.  Like the federal Anti-Kickback Statute, the PPACA amended the intent standard for certain healthcare fraud statutes under HIPAA such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business.  HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH), and its implementing regulations, imposes certain requirements on certain types of entities relating to the privacy, security, and transmission of individually identifiable health information.  Among other things, HITECH made HIPAA’s security standards directly applicable to business associates—independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity.  HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make

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civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions.  In addition,

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state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

Additionally, the federal Physician Payments Sunshine Act within the PPACA, and its implementing regulations, require that certain manufacturers of drugs, devices, biologicals, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program (with certain exceptions) annually report information to the CentersCenter for Medicare and Medicaid Services (CMS), related to certain payments or other transfers of value made or distributed to physicians and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and certain ownership and investment interests held by physicians and their immediate family members.  This information is made publicly available on a searchable website.  Effective January 2022, information on payments or transfers of value to physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, and certified nurse-midwives will also need to be reported.

Also, many states have similar healthcare statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer.payor.  Some states require the posting of information relating to clinical trials.  Other states require the reporting of expenses relating to the marketing and promotion of drug products and the reporting of gifts and payments to individual healthcare practitioners in these states.  Other states prohibit various marketing-related activities, such as the provision of certain kinds of gifts or meals.  Still other states require the reporting of certain pricing information, including information pertaining to and justification of price increases, or prohibit prescription drug price gouging.increases.  In addition, states such as California, Connecticut, Nevada, and Massachusetts require pharmaceutical companies to implement compliance programs and/or marketing codes. If our operations are found to be in violation of any of the health regulatory laws described above or any other laws that apply to us, we may be subject to penalties, including potentially significant criminal, civil, and administrative penalties, damages, fines, disgorgement, individual imprisonment, exclusion of products from reimbursement under government programs, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.  To the extent that any of our products will be sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.

Pharmaceutical Coverage, Pricing, and Reimbursement

In both domestic and foreign markets, our sales of any approved products will depend in part on the availability of coverage and adequate reimbursement from third-party payers.payors.  Third-party payerspayors include government health administrative authorities, managed care providers, private health insurers, and other organizations.  Patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payerspayors to reimburse all or part of the associated healthcare costs.

Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products.  Sales of our products will therefore depend substantially, both domestically and abroad, on the extent to which the costs of our products will be paid by third-party payers.payors.  These third-party payerspayors are increasingly focused on containing healthcare costs by challenging the price and examining the cost-effectiveness of medical products and services.  In addition, significant uncertainty exists as to the coverage and reimbursement status of newly approved healthcare product candidates.  The market for our products and product candidates for which we may receive regulatory approval will depend significantly on access to third-party payers’payors’ drug formularies or lists of medications for which third-party payerspayors provide coverage and reimbursement.  The industry competition to be included in such formularies often leads to downward pricing pressures on pharmaceutical companies.  Also, third-party payerspayors may refuse to include a particular branded drug in their formularies or otherwise restrict patient access to a branded drug when a less costly generic equivalent or other alternative is available.

Because each third-party payerpayor individually approves coverage and reimbursement levels, obtaining coverage and adequate reimbursement is a time-consuming, costly, and sometimes unpredictable process.  We may be

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required to provide scientific and clinical support for the use of any product to each third-party payerpayor separately with no assurance that approval would be obtained, and we may need to conduct expensive pharmacoeconomic studies to demonstrate the cost-effectiveness of our products.  This process could delay the market acceptance of any product and could have a negative effect on our future revenue and operating results.  We cannot be certain that our products and our product candidates will be considered cost-effective.  Because coverage and reimbursement determinations are made on a payer-by-payerpayor-by-payor basis, obtaining acceptable coverage and reimbursement from one payerpayor does not guarantee that we will obtain similar acceptable coverage or reimbursement from another payer.payor.  If we are unable to obtain coverage of, and adequate reimbursement and payment levels for, our product candidates from third-party payers,payors, physicians may limit how much or under what circumstances they will prescribe or administer them and patients may decline to purchase them.  This in turn could affect our ability to successfully commercialize our products and adversely affect our profitability, results of operations, financial condition, and future success.

In addition, in many foreign countries, particularly the countries of the European UnionEU and China, the pricing of prescription drugs is subject to government control.  In some non-U.S.non- United States jurisdictions, the proposed pricing for a drug must be approved before it may be lawfully marketed.  The requirements governing drug pricing vary widely from country to country.  For example, the European UnionEU provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to

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control the prices of medicinal products for human use.  A member state may approve a specific price for the medicinal product, or it may instead adopt a system of direct or indirect controls on the profitability of a company placing the medicinal product on the market.  We may face competition for our product candidates from lower-priced products in foreign countries that have placed price controls on pharmaceutical products.  In addition, there may be importation of foreign products that compete with our own products, which could adversely affect our profitability.

Healthcare Reform

In the United States and foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system that could affect our future results of operations as we begin to commercialize our products.  In particular, there have been and continue to be a number of initiatives at the U.S.United States federal and state level that seek to reduce healthcare costs.

Furthermore, political, economic, and regulatory influences are subjecting the healthcare industry in the United States to fundamental change.  Initiatives to reduce the federal budget and debt and to reform healthcare coverage are increasing cost-containment efforts.  We anticipate that Congress, state legislatures, and the private sector will continue to review and assess alternative healthcare benefits, controls on healthcare spending through limitations on the growth of private health insurance premiums and Medicare and Medicaid spending, the creation of large insurance purchasing groups, price controls on pharmaceuticals, limitations on rebate payments by drug manufacturers, and other fundamental changes to the healthcare delivery system.  Any proposed or actual changes could limit or eliminate our spending on development projects and affect our ultimate profitability.  For example, in March 2010, the PPACA was signed into law.  Among other cost containment measures, the PPACA established: an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents; revised the methodology by which rebates owed by manufacturers to the state and federal government for covered outpatient drugs under the Medicaid Drug Rebate Program are calculated; increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program; and extended the Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations.  The PPACA also expanded eligibility criteria for Medicaid programs, created a new Medicare Part D discount program, expanded the entities eligible for discounts under the Public Health Services Pharmaceutical pricing program, and created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.  In the future, there may continue to be additional proposals relating to the reform of the U.S.United States healthcare system, some of which could further limit the prices we are able to charge or the amounts of reimbursement available for our products, or which could otherwise affect our commercial operations and ability to be profitable.  If future legislation were to impose direct governmental price controls and access restrictions, it could have a significant adverse effect on our business.  Managed care organizations, as well as Medicaid and other government agencies, continue to seek price discounts.  Some states have implemented, and other states are considering, price controls or patient access constraints under the Medicaid program, and some states are considering price-control regimes that would apply to broader segments of their populations that are not Medicaid-eligible.  More recently, the Tax Cuts and Jobs Act of 2017 (the 2017(2017 Tax

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Act) was signed into law, which eliminated certain requirements of the ACA,PPACA, including the individual mandate, and the current administration has further suggested that it may seek repeal of all or portions of the PPACA.  There is uncertainty with respect to the impact these changes, if any, may have, and any changes likely will take time to unfold.

In addition, on August 2, 2011, the Budget Control Act of 2011 was enacted and created measures for spending reductions by Congress.  A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the fiscal years 2012 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs.  These reductions included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect on April 1, 2013.  These reductions have been extended through 20272029 unless additional Congressional action is taken.  Also, in January 2013, the American Taxpayer Relief Act of 2012 was signed in tointo law, which, among other things, reduced Medicare payments to several types of health care providers.

Due to the volatility in the current economic and market dynamics, we are unable to predict the effect of any unforeseen or unknown legislative, regulatory, payer,payor, or policy actions, which may include cost containment and healthcare reform measures.  Such policy actions could have a material adverse effect on our profitability.

New Legislation and Regulations

From time to time, legislation is drafted, introduced, and passed in Congress that could significantly change the statutory provisions governing the testing, approval, manufacturing, and marketing of products regulated by the FDA.  For example, the 21^st Century Cures Act, which was enacted on December 13, 2016, contains a number of provisions related to the development of drug and biological products, including provisions intended to encourage the modernization of clinical trial design and support broader use of tools like biomarkers and methods to collect patient experience data.  While the 21^st Century Cures Act is intended to make drug and biological product development less time-consuming and less costly, it does not change the scientific/medical standard for approval or the quality or quantity of evidence necessary to support approval.  In addition, the Food and Drug Administration Act of 2017 reauthorized and amended several drug provisions that were scheduled to sunset, such as the prescription drug user fee provisions, and made other changes to the Federal Food, Drug, and Cosmetic Act,FFDCA, including provisions related to development of pediatric drugs and access to generic drugs.  In addition to new legislation, FDA regulations and policies are often revised or interpreted by the agency in ways that may significantly affect our business and our products.  It is impossible to

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predict whether further legislative changes will be enacted or whether FDA regulations, guidance, policies, or interpretations changed or what the effect of such changes, if any, may be.

Foreign Regulation

We are planning on seeking approval for our product candidates in Europe, Japan, and other countries.  To market any product outside of the United States, we would need to comply with numerous and varying regulatory requirements of other countries and jurisdictions regarding quality, safety, and efficacy that govern, among other things, clinical trials, manufacturing, marketing authorization, commercial sales, and distribution of our products.  Whether or not we obtain FDA approval for a product, we would need to obtain the necessary approvals by the comparable foreign regulatory authorities before we can commence clinical trials or marketing of the product in foreign countries and jurisdictions.  Although many of the issues discussed above with respect to the United States apply similarly in the context of other countries in which we may seek approval, the approval process varies among countries and jurisdictions and can involve different amounts of product testing and additional administrative review periods.  For example, in Europe, a sponsor must submit a clinical trial application (CTA), much like an IND prior to the commencement of human clinical trials.  A CTA must be submitted to each national health authority and an independent ethics committee.

For other countries outside of the European Union,EU, such as the countries in Eastern Europe, Latin America, or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing, and reimbursement vary from country to country.  The time required to obtain approval in other countries and jurisdictions might differ from or be longer than that required to obtain FDA approval.  Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively affect the regulatory approval process in other countries.

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Our clinical trial programs and research collaborations may implicate international data protection laws, including the General Data Protection Regulation (GDPR) in the EU. The GDPR became effective on May 25, 2018 and governs the collections and use of personal data in the EU.  The GDPR, which is wide-ranging in scope, imposes several obligations and restrictions concerning the consent of the individuals to whom the personal data relates, the information provided to the individuals, the transfer of personal data out of the EU, data breach notifications, security and confidentiality of the personal data, the use of third-party processors in connection with the processing of the personal data, and imposition of substantial potential fines for breaches of the data protection obligations.  

United States Patent Term Restoration and Regulatory Exclusivity for Approved Products

The Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Act, permits a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process.  The patent term restoration period is generally one-half the time between the effective date of an initial IND and the submission date of an NDA, plus the time between the submission date of the NDA and the approval of that product candidate application.  Patent term restoration cannot, however, extend the remaining term of a patent beyond a total of 14 years from the product’s approval date.  In addition, only one patent applicable to an approved product is eligible for the extension, and the application for the extension must be submitted prior to the expiration of the patent.  The U.S.United States Patent and Trademark Office (USPTO), in consultation with the FDA, reviews and approves applications for any patent term extension or restoration.  In the future, we expect to apply for restoration of patent term for patents relating to each of our product candidates to add patent life beyond the current expiration date of such patents, depending on the length of the clinical trials and other factors involved in the filing of the relevant NDA.

Market exclusivity provisions under the Federal Food, Drug, and Cosmetic ActFFDCA can also delay the submission or the approval of certain applications of companies seeking to reference another company’s NDA.  For example, the Hatch-Waxman Act provides a five-year period of exclusivity to any approved NDA for a product containing a new chemical entity (NCE),NCE, never previously approved by FDA either alone or in combination with another active moiety.  No application or an abbreviated new drug application (ANDA), that references the NDA for the NCEnew chemical entity (NCE) may be submitted during the five-year exclusivity period, except that such applications may be submitted after four years if they contain a certification of patent invalidity or non-infringement of the patents listed with the FDA for the innovator NDA.

Foreign Country Data Exclusivity

The European UnionEU also provides opportunities for additional market exclusivity.  For example, in the European Union,EU, upon receiving marketing authorization, an NCE generally receives eight years of data exclusivity and an additional two years of market exclusivity.  If granted, data exclusivity prevents regulatory authorities in the European UnionEU from referencing the innovator’s data to assess a generic application.  During the additional two-year period of market exclusivity, a generic marketing authorization can be submitted, and the innovator’s data may be referenced, but no generic product can be marketed until the expiration of the market exclusivity.

Intellectual Property

Our success depends in part upon our ability to obtain and maintain patent and other intellectual property protection for our product candidates including patents claiming compositions of matter, therapeutic uses, distinct forms of specific compounds, formulations, manufacturing methods, and uses in specific indications and patient populations.  We are actively engaged in research to further develop and maintain our competitive position and may rely in part on trade secrets, proprietary know-how, and continuous technological innovation to support and enhance our competitive position.

We seek to protect and strengthen our proprietary position by, among other methods, filing United States and foreign patent applications related to our proprietary technologies, inventions, and any improvements that we consider important to the development and implementation of our business and strategy.  Our ability to maintain and solidify our proprietary position for our products and technologies will depend, in

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part, on our success in obtaining and enforcing valid patent claims.  Additionally, we may benefit from a variety of regulatory frameworks in the United States, Europe, Japan, China, and other territories that provide periods of non-patent-based exclusivity for

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qualifying drug products.  See “Business—Government Regulation—United States Patent Term Restoration and Regulatory Exclusivity for Approved Products.”

We cannot ensure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications that may be filed by us in the future, nor can we ensure that any of our existing or subsequently granted patents will be useful in protecting our drug candidates, technological innovations, or processes.  Additionally, any existing or subsequently granted patents may be challenged, invalidated, circumvented, or infringed.  We cannot guarantee that our intellectual property rights or proprietary position will be sufficient to permit us to take advantage of current market trends or otherwise to provide or protect competitive advantages.  Furthermore, our competitors may be able to independently develop and commercialize similar products, or may be able to duplicate our technologies, business model, or strategy, without infringing our patents or otherwise using our intellectual property.

Our patent estate (patents and patent applications owned by or exclusively licensed to Reata and one family of patent applications owned by AbbVie and contractually available for Reata’s use)Reata), on a worldwide basis, encompasses more than 240900 granted patents and more than 280260 pending patent applications, including more than 140550 granted patents and more than 150160 pending patent applications related to bardoxolone, methyl, omaveloxolone, RTA 901, and RTA 1701.  More than 60200 granted patents and more than 10050 pending applications claim additional structural classes of Nrf2 activators, providing further protection for the franchise and a potential source of additional development candidates.  OneTwo issued United States patent, onepatents, more than ten issued foreign patent, apatents, two pending United States patent application,applications, and elevena number of pending United States and foreign patent applications contain composition of matter claims to RTA 901 and related compounds.  RTA 1701 is covered by more than 2040 granted U.S.United States and foreign patents and a number of pending applications.

Our later-expiring granted patents with claims to compositions of matter for bardoxolone, methyl, including patents claiming the commercial form, have an expiration date of 2029 in the United States and 2028 elsewhere.  The patent that covers specific formulations of bardoxolone, methyl, including the commercial formulation, has an expiration date of 2030.  Other granted patents and pending patent applications relating to specific uses of bardoxolone, methyl, including the treatment of PH,pulmonary hypertension (PH), PAH, and CKD, have expiration dates ranging from 2029 to 2034.  Fundamental composition of matter patents and applications claiming omaveloxolone have an expiration date in 2033.  These patents and applications also contain claims to therapeutic uses of omaveloxolone.  The fundamental United States composition of matter patent claiming RTA 901, and its foreign equivalents, have an expiration date in 2033.  Patents and pending applications covering RTA 1701, including composition of matter claims and method of use claims, have expiration dates ranging from 2031 to 2037.

The protection afforded by any particular patent depends upon many factors, including the type of patent, scope of coverage encompassed by the granted claims, availability of extensions of patent term, availability of legal remedies in the particular territory in which the patent is granted, and success of any challenges to the patent, if asserted.  Changes in either patent laws or in the interpretation of patent laws in the United States and other countries could diminish our ability to protect our inventions and to enforce our intellectual property rights.  Accordingly, we cannot predict with certainty the enforceability of any granted patent claims or of any claims that may be granted from our patent applications.

The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual property rights.  Our ability to maintain and solidify our proprietary position for our products and core technologies will depend on our success in obtaining effective claims and enforcing those claims once granted.  We have in the past been involved in various administrative proceedings with respect to our patents and patent applications and may, as a result of our extensive portfolio, be involved in such proceedings in the future.  Additionally, in the future, we may claim that a third party infringes our intellectual property or a third party may claim that we infringe its intellectual property or that our intellectual property is invalid or unenforceable.  In any of the administrative proceedings or in litigation, we may incur significant expenses, damages, attorneys’ fees, costs of proceedings, and experts’ fees, and management and employees may be required to spend significant time in connection with these actions.

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Because of the extensive time required for clinical development and regulatory review of a product candidate we may develop, it is possible that any patent related to our product candidates may expire before any of our product candidates can be commercialized or may remain in force for only a short period of time following commercialization, thereby reducing the advantage afforded by any such patent.

The patent positions for our most advanced programs are summarized below.

Bardoxolone Methyl Patent Portfolio

Our bardoxolone methyl patent portfolio includes fivesix families of granted United States patents, some with related applications pending, and two additional families of pending United States patent applications.  Granted and pending claims offer various forms of protection for bardoxolone methyl including claims to compositions of matter, pharmaceutical compositions, specific forms (such as crystalline or non-crystalline forms), specific formulations, and methods for treating a variety of diseases, including PAH and CKD, using bardoxolone methyl or its analogs.  These United States patents and applications, and their foreign equivalents, are described in more detail below.

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There are two families of composition of matter patents containing claims for bardoxolone methyl.that cover bardoxolone.  The original patent family containing claims to bardoxolone methyl and related compounds was filed in 1999 and exclusively licensed to Reata in 2004 (see “Business—Intellectual Property—Licenses”).  Exclusive of any patent term extension, one granted United States patent from this family containing claims covering bardoxolone methyl has an expiration date in 2022.  Corresponding patents granted in Canada, Europe (validated in multiple European Patent Convention (EPC) member states), and Japan have expiration datesexpired in 2019.  Exclusive of any patent term extension, the granted United States patents containing claims covering specific forms of bardoxolone, methyl, including the commercial form, are due to expire in 2028 or 2029.  Two corresponding regional patents have been granted in Europe and each is validated in multiple European Patent ConventionEPC member states.  Additional corresponding patents have been granted in Japan, China, Canada, and several other countries, and related applications provide broad international protection in additional territories worldwide.  Exclusive of any patent term extension, these granted foreign patents and pending patent applications, if granted, are due to expire in 2028.

In some cases, granted United States patents claiming bardoxolone methyl have a longer statutory term than the corresponding foreign patents.  This results from the USPTO’s practice of granting patent term adjustments for examination delays originating at the USPTO.  Such adjustments are generally not available under foreign patent laws.  If bardoxolone methyl is approved for marketing in the United States, under the Hatch-Waxman Act we may be eligible for up to five years patent term extension for a granted United States patent containing claims covering bardoxolone methyl.bardoxolone.  Similar term extensions may be available in Europe, Japan, Australia, and certain other foreign jurisdictions.  The amount of any such term extension, and the identity of the patent to which it would apply, are dependent upon several factors including the duration of the development program and the date of marketing approval.  See “Business—Government Regulation—United States Patent Term Restoration and Regulatory Exclusivity for Approved Products.”

We also own or exclusively license various United States and foreign granted patents and pending patent applications containing claims covering formulations of bardoxolone, methyl, including the planned commercial formulation, and methods of using bardoxolone methyl for the treatment of multiple diseases including PH, PAH, endothelial dysfunction (an essential component of many cardiovascular disorders including PAH), cardiovascular disease, CKD, Alport syndrome, metabolic disorders, and obesity.

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The most relevant granted United States patents with composition of matter or method of use claims covering bardoxolone methyl are listed below, along with their projected expiration dates exclusive of any patent term extension.

Omaveloxolone Patent Portfolio

Omaveloxolone is protected by three families of patents.  The first, filed in April 2009, contains composition of matter claims that encompass omaveloxolone and many related compounds.  This family includes fourfive issued United States patents and a number of granted patents in foreign jurisdictions including China, Mexico, and Japan.  Additional United States and foreign applications from this family are pending.  The second family, filed in April 2013, is specifically focused on omaveloxolone and includes composition of matter claims and method of use claims.  The initial United States patent from this family was issued on March 31, 2015.  The issued claims include composition of matter claims to omaveloxolone without regard to morphic form, claims to several distinct morphic forms of omaveloxolone, including the form used in oral dosing formulations, and claims to various methods of therapeutic use.  A first continuation application has also issued, and a second continuation application is pending.  Foreign equivalents of the original U.S.United States application have been filed in Europe, Canada, Mexico, Japan, China, and more than 20 other territories.  The European application has granted and has been validated in multiple European Patent ConventionEPC member states.  In addition, a divisional application has been filed in Europe.  The Japanese and Chinese applications have also granted.  A third patent family, filed by AbbVie in April 2014 and subjectlicensed to us under the terms of the AbbVie collaboration agreement,Reacquisition Agreement, claims additional morphic forms of omaveloxolone.

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The most relevant granted United States patents with claims covering omaveloxolone are listed below, along with their projected expiration dates.  As discussed above for bardoxolone, methyl, if omaveloxolone is approved for marketing in the United States, we may be eligible for term extension under the Hatch-Waxman Act for a granted United States patent containing claims covering omaveloxolone.  Similar term extensions may be available in Europe, Japan, and certain other foreign jurisdictions.  The amount of any such term extension, and the identity of the patent to which it would apply, are dependent upon several factors including the duration of the development program and the date of marketing approval.  See “Government Regulation—United States Patent Term Restoration and Regulatory Exclusivity for Approved Products.”

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RTA 901 Patent Portfolio

RTA 901 is protected by a family of patents and applications based on a PCTthe Patent Cooperation Treaty (PCT) application filed in 2013.  Patents from this family have been granted in the United States, Australia, China, Eurasia, Japan, Mexico, and New Zealand.  Applications are pending in Europe, Canada, Australia, Mexico, and several other countries.  In addition, aA first United States continuation application has been filed in thealso issued, and a second United States.States continuation application is pending.  Both issued and pending claims in this family include composition of matter claims that specifically cover RTA 901 regardless of form, and other claims that cover related compounds.  Patents from this family will expire in 2033 unless extended.  Details of the issued United States patent are shown below.

Trade Secrets and Know-How

Certain aspects of our activities, such as our research and manufacturing efforts, rely in part on proprietary know-how or trade secrets.  Because we may employ third-party contractors to conduct certain aspects of those activities and because we collaborate with various organizations and academic institutions on the advancement of our technology platform, we must at times share trade secrets with them.  We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements, or other similar agreements with our collaborators, advisors, employees, and consultants prior to beginning research or disclosing proprietary information.  These agreements typically limit the rights of the third parties to use or disclose our confidential information, such as trade secrets.  Despite these contractual provisions, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements.  Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.  We also seek to preserve the integrity and confidentiality of our proprietary technology and processes by maintaining physical security of our premises and physical and electronic security of our information technology systems.

Licenses

2004 Dartmouth and MD Anderson License

In 2004, we entered into an agreement with the Board of Regents of The University of Texas System in which we obtained from Thethe Trustees of Dartmouth College (Dartmouth) and The University of Texas MD Anderson Cancer Center (MD Anderson), an exclusive, sublicenseable, worldwide license to compounds, including bardoxolone, methyl, and claims in certain patents and patent applications, along with associated know-how, to manufacture, have manufactured, use and sell defined licensed products for use within the field of human

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therapeutic and diagnostic uses, research reagents, and veterinary uses.  Dartmouth and MD Anderson retain certain limited rights related to academic research and educational use of these compounds, and the U.S.United States government retains certain limited rights.

Under the terms of this license, we paid an initial licensing fee and sunk-in patent costs and are required to pay annual license maintenance fees.  In addition, the license requires us to makepay certain development milestone payments depending on the licensed indication, a portion of sublicensing revenue received by us from sublicenses that we grant under the licensed technology at percentages between mid-teen digits and low-single digits, and royalties in the low single digits on net sales of licensed products by us, our affiliates, and our sublicensees subject to specified annual minimums.  To date, we have made $25.2$26.7 million in development and sublicense payments under the license.

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We have a continuing obligation to use best efforts to commercialize the licensed technology.  The license is effective until the last expiration of a claim in a licensed patent that covers the licensed product or 20 years if no licensed patent covers the licensed product.  The license can be terminated by the licensors for our material breach subject to a specified notice and cure period based on the nature of the breach, if we become insolvent or enter bankruptcy or receivership proceedings, if we fail to provide satisfactory evidence that we are exercising best efforts to commercialize a licensed invention, or if two payments are late or unpaid within a twelve-month period.  Upon any termination of the license, we grant licensors a non-exclusive, sublicenseable license to any improvements that we make to the licensed technology, including those that we license from third parties, subject to a mutually agreed royalty.

2012 Amendment to the 2004 Dartmouth and MD Anderson License

In July 2012, the parties executed an amendment to the 2004 license.  This amendment provides, among other terms, that we will pay to the licensors a certain amount from the next one or more milestone payments received by us under the AbbVie license agreement and a low single-digit royalty on net sales of certain Nrf2 activator compounds under the AbbVie collaboration agreement,Collaboration Agreement, including omaveloxolone, that are claimed in certain patents and patent applications that are wholly owned by or assigned to us as identified in the AbbVie collaboration agreement.Collaboration Agreement.

2009 Dartmouth License

In 2009, we entered into an agreement with Dartmouth, pursuant to which Dartmouth granted us an exclusive, worldwide, sublicenseable license to Dartmouth’s rights in patents and patent applications jointly owned by us and Dartmouth claiming the use of bardoxolone methyl and related compounds in the treatment of renal, cardiovascular, and certain metabolic diseases, along with associated know-how, to make, have made, use and sell defined licensed products in the licensed field.  Dartmouth retains certain limited rights related to academic research and educational use of these compounds.

Under the terms of this license, we paid to Dartmouth an initial licensing fee and we are required to pay annual maintenance fees and payments associated with the achievement of certain development and aggregate sales milestones.  In addition, Dartmouth is entitled to receive from us a portion of our sublicensing revenue from sublicenses that we grant under the licensed technology at a percentage in the low single digits, and royalties in the low single digits on net sales of licensed products by us, our affiliates and our sublicensees.  In July 2012, the parties executed an amendment to the license, which provides, among other terms, that we pay to Dartmouth a sublicensing fee in connection with a specified milestone under the AbbVie license agreement.  To date, we have made $10.2$10.9 million in development and sublicense payments under the license.

We are obligated to exert commercially reasonable efforts to develop and commercialize and effectively manufacture and market licensed products, including, targeting certain development milestones specified in the agreement.

The license is effective until the last valid claim of the licensed patents in the territory expires.  Each party has the right to terminate the license for the other party’s material breach, subject to a specified notice and cure period.  The license terminates automatically in the event that we become insolvent, make an assignment for the benefit of creditors, or file for bankruptcy.

2014 University of Kansas Licenses

In September 2014, we entered into two exclusive, worldwide license agreements with KU Center for Technology Commercialization, Inc., the manager of intellectual property owned by University of Kansas and the University of Kansas Medical Center (the University of Kansas), to compounds claimed in certain patents and patent applications either owned exclusively by the University of Kansas or owned jointly by the University of Kansas and the National Institutes of Health (the NIH), that act as small molecule modulators of heat shock protein activity and responses in all human and veterinary therapeutic and diagnostic uses.

Under the terms of these licenses, we paid the University of Kansas initial licensing fees and reimbursed University of Kansas for past patent expenses incurred.  Under each agreement, we are required to pay annual license maintenance fees, are obligated to spend a specified threshold for sponsored research to be performed by the University of Kansas, and are obligated to pay University of Kansas development and regulatory milestone

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payments for each of the first two products and sales milestone payments only on the first product developed.  Under each agreement the University of Kansas is entitled to receive from us a portion of any sublicensing revenue we receive from sublicenses that

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we grant under the licensed technology at a percentage ranging from the low single digits to the low thirties depending on the stage of development at the time the sublicense is granted.  Under each agreement, the University of Kansas is entitled to receive royalties on net sales of licensed products sold by us, our affiliates, and our sublicensees at a percentage ranging in the low single digits depending on the type of licensed product, subject to minimum annual royalties.  To date, we have made $0.7 million in development and sublicense payments under these licenses.  Under each license agreement we are obligated to use commercially reasonable efforts to develop, manufacture, and market at least one licensed compound.  Additionally, under each license agreement, the University of Kansas retains limited rights related to research and educational use of these compounds, and the U.S.United States government also retains certain limited rights related to these compounds arising from federal funding of the research that led to their discovery.  Under one agreement, the NIH retains limited rights related to research and educational use of compounds claimed in patents that name NIH as an assignee.

Each license agreement is effective on a per-country basis until the later of: (i) the last expiration of a claim in a licensed patent that covers the licensed product in such country; (ii) ten years from first commercial sale of a licensed product in such country; or (iii) the expiration of any period of regulatory exclusivity for a licensed product that bars the entry of generic competitors in such country.

Each license agreement can be terminated by the University of Kansas if we fail to make required payments or reports, fail to use commercially reasonable efforts to commercialize a licensed product, file for bankruptcy or become insolvent, enter into receivership or a composition with creditors, or fail to perform certain other obligations including the achievement of certain developmental milestones within specified time limits, and we fail to cure any such breach within 30 days of receiving a notice of default from the licensors.

Third-Party Filings

A number of United States and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing products.  Because patent applications can take many years to issue, there may be currently pending applications unknown to us that, if granted, could pose an infringement risk with respect to our use of our product candidates or proprietary technologies.

If a third party claims that we infringe its intellectual property rights, we may face a number of issues, including but not limited to litigation expenses, substantial damages, attorney fees, injunction, royalty payments, cross-licensing of our patents, redesign of our products or processes, and related fees and costs.

We may be exposed to, or threatened with, future litigation by third parties having patent or other intellectual property rights alleging that our products, product candidates, and proprietary technologies infringe their intellectual property rights.  If one of these patents were to be found to cover our products, product candidates, proprietary technologies, or their uses, we could be required to pay damages and could be restricted from commercializing our products, product candidates, or using our proprietary technologies unless we obtain a license to the patent.  A license may not be available to us on acceptable terms, if at all.  In addition, during litigation, the patent holder might obtain a preliminary injunction or other equitable right, which could prohibit us from making, using or selling our products, technologies, or methods.

Employees

As of December 31, 2017,2019, we had 93220 full-time employees, 2359 of whom held Ph.D. or M.D. degrees, 62145 of whom were engaged in research and development, and 3175 of whom were engaged in business development, finance, information systems, facilities, human resources, legal functions, or administrative support.  None of our employees is represented by a labor union, and none of our employees has entered into a collective agreement with us.  We consider our employee relations to be good.

Research and Development44

In each of the last three fiscal years ended December 31, 2017, 2016, and 2015, we have spent $71.3 million, $39.5 million, and $35.1 million, respectively, on research and development.

Facilities

Our principal executive offices are located in Irving,Plano, Texas, where we lease approximately 122,000 square feet of office space.  We also lease approximately 34,890 square feet of additional office and laboratory space.space in Irving, Texas.  Our leases expire in April 2022 with four successive three-month-period renewal options and October 2022 with an option to renew up to six months, respectively.  On October 15, 2019, we entered into a lease expiresagreement with TC Legacy Land Venture, LLC (the 2019 Lease Agreement), to lease a single-tenant and build-to-suit building of approximately 327,400 square feet of office and laboratory space located in October 2020.Plano, Texas with an initial lease term of 16 years with an option to renew up to ten years.  We believe that our facilities are adequate for our current needs and that suitable additional or substitute space would be available if needed.

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Executive Officers and Directors

The following table sets forth certain information with respect to our executive officers and directors:

Executive Officers

Dawn C. Birjoined Reata as Chief Commercial Officer in September 2016 to develop and oversee marketing, market access, sales, training and commercial operations.  Prior to joining Reata, Ms. Bir most recently served as Vice President of Sales with Pharmacyclics, LLC.  From February 2013 to September 2016, she built and led their first hematology national sales organization of sales representatives, division managers and regional sales directors, responsible for the launch of IMBRUVICAIMBRUVICA® in the United States and Puerto Rico.  From October 2011 to February 2013, Ms. Bir served as Vice President Sales & Marketing with McKesson US Pharmaceutical, SKY Pharmaceuticals and RxPak.  Prior thereto, she held positions of increasing responsibility within McKesson Corporation, Genentech, Inc., and Bristol-Myers Squibb Company.  She currently serves on the board of directors of Geron Corporation, a publicly traded clinical stage pharmaceutical company.  Ms. Bir holds a B.S. in Biology from Binghamton University.University.

J. Warren Huff is the Chairman, Chief Executive Officer and President of Reata.  He has served as our sole CEO, President and as Chairman of the board of directorsBoard since our founding in 2002.  Prior to founding Reata, Mr. Huff served as CEO in a number of biotechbiotechnology and information technology start-up enterprises.  Mr. Huff started his career as an attorney with Johnson & Gibbs, P.C., where he was a partner and Chairman of the Corporate Securities Practice.  Mr. Huff received a B.B.A. magna cum laude from the University of Texas at Austin and a J.D. from Southern Methodist University.  Our board of directorsBoard believes that Mr. Huff is qualified to serve on our board of directorsBoard due to his extensive experience investing and working in the pharmaceuticals industry.

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Colin J. Meyer, M.D.joined Reata as one of our first employees in 2003 and is Reata’s Chief Medical Officer.  Dr. Meyer received a B.S. in chemistry with specialization in biochemistry and a B.A. in biology from the University of Virginia.  He received an M.D. from the University of Texas Southwestern Medical School and an M.B.A. from Southern Methodist University Cox School of Business.

Keith W. Ward, Ph.D. is Reata’s Chief Development Officer and oversees research and development, clinical operations, regulatory affairs, manufacturing, and project management.  Dr. Ward joined Reata in July 2011.  Prior to joining Reata, he developed ophthalmic pharmaceuticals and medical devices in positions of increasing responsibility for Bausch & Lomb Incorporated, including as Global Vice President of Pharmaceutical R&D, from May 2005 to June 2011.  Before that, Dr. Ward held positions of increasing responsibility within GlaxoSmithKline PLC and SmithKline Beecham Pharmaceuticals.  Dr. Ward earned a B.S. in Toxicology with a minor in Chemistry from Northeast Louisiana University and a Ph.D. in Toxicology from the University of North Carolina at Chapel Hill.

Jason D. WilsonManmeet S. Soni is Reata’s Chief Financial Officer and oversees corporate strategy, finance, accounting, and treasury, human resources, business development,tax, corporate communications, investor relations and information technology.  He joined Reata in August 2019.  Prior to joining Reata, Mr. Soni served as Senior Vice President and Chief Financial Officer of Alnylam Pharmaceuticals, Inc. from May 2017 until August 2019.  From March 2016 to February 2017, Mr. Soni served as the Executive Vice President, Chief Financial Officer and Treasurer of ARIAD Pharmaceuticals, Inc., a publicly held biopharmaceutical company, when ARIAD was acquired by Takeda Pharmaceutical Company Limited.  Mr. Soni continued as an employee of ARIAD through May 2017.  Previously, Mr. Soni served as Chief Financial Officer and Treasurer of Pharmacyclics, Inc., a publicly held biopharmaceutical company, until its acquisition by AbbVie in 2015.  Prior to joining Pharmacyclics, Mr. Soni worked at ZELTIQ Aesthetics Inc., a publicly held medical technology company as corporate controller.  Prior to ZELTIQ, Mr. Soni worked at PricewaterhouseCoopers in their Life Science and Venture Capital Group.  Mr. Soni currently serves as a member of the board of directors of Pulse Biosciences, Inc., Arena Pharmaceuticals, Inc. and Summit Therapeutics plc, each of which is a publicly traded company.  Mr. Soni graduated from Hansraj College at Delhi University in India.  He is a CPA (certified public accountant) and Chartered Accountant from the Institute of Chartered Accountants of India.

Jason D. Wilson is Reata’s Executive Vice President, Operations and oversees program and clinical operations, manufacturing, human resources, bioinformatics, quality and global alliances.  Until August 2019, Mr. Wilson was Reata’s Chief Financial Officer.  He joined Reata in 2006.  Prior to joining Reata, he held positions as Vice President, Finance & Corporate Controller at Caris Diagnostics and as a Senior Manager in the health-sciences group at Ernst & Young LLP.  He served on the board of directors of CytoSen Therapeutics, a private company, until its sale to Kiadis Pharmaceuticals.  Mr. Wilson holds a B.B.A. in Accounting from Henderson University and an M.B.A. from the University of Central Arkansas.Arkansas.

Michael D. Wortley joined Reata as Chief Legal Officer and Vice President in April 2015.  Prior to joining Reata, Mr. Wortley was an attorney at Vinson & Elkins LLPL.L.P from 1995 to March 2015, serving in various capacities, including Chief Operating Partner of the firm and Managing Partner of the Dallas office, and, prior to 1995, at Johnson & Wortley, P.C., serving as Chairman of the Board and President.  He currently serves on the board of directors of Pioneer Natural Resources Company.Company, a publicly traded company.  Mr. Wortley earned a B.A. in Political Science from Southern Methodist University, a Master’s degree in Regional Planning from the University of North Carolina at Chapel Hill and a J.D. from Southern Methodist University Dedman School of Law.

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Non-Employee Directors

James E. Bass has served as a member of the Board of Directors since July 2004.  For the past five years, Mr. Bass has been managing family assets and investments as his primary business activity.  Mr. Bass is a member of the Boardboard of Snowbird Holdings, LLC and Trinity Summits, LLC.  He previously served as an executive director of FB Gemini Limited, an Asian regional investment bank based in Hong Kong, prior to which he was an associate attorney and later partner at Gibson, Dunn & Crutcher LLP. Mr. Bass graduated with a B.A. from Yale University and obtained his J.D. from Stanford University.  Our board of directorsBoard believes that Mr. Bass is qualified to serve on our board of directorsBoard due to his extensive experience investing and extensive service on the boards of directors and boards of managers of other enterprises.

William D. McClellan, Jr. has served as a member of the Board of Directors since March 2017.  Mr. McClellan, Jr. has served as the Chief Financial Officer atof Aerin MedicanMedical Inc. since January 2018.  Mr. McClellan, Jr. is a financial management consultant to healthcare and life sciences companies, serving as the managing member of Goodwater Consulting, LLC since March 2017.  From June 2004 until June 2016, Mr. McClellan, Jr. was the Chief Financial Officer and Executive Vice President, Finance at On-X Life Technologies Holdings, Inc.  Prior to June 2004, Mr. McClellan, Jr. held financial and accounting positions at various healthcare and other companies and was a certified public accountant serving as an auditor with Price Waterhouse CoopersPricewaterhouseCoopers for nine years.  He currently serves on the board of directors of Apollo Endosurgery, Inc., a publicly-tradedpublicly traded company, and chairs its audit committee.  Mr. McClellan, Jr. received a B.B.A. in accounting from Abilene Christian University and is a certified public accountant.  Our Board believes that Mr. McClellan, Jr. is qualified to serve on our Board due to his extensive experience in finance and

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accounting roles in the healthcare and life sciences industry and in serving as a certified public accountant at a large public accounting firm.

R. Kent McGaughy, Jr.has served as a member of the Board of Directors since December 2004.  Mr. McGaughy Jr. has been a partner in CPMG, Inc. since 2006.  Prior to joining CPMG’s predecessor, Cardinal Investment Company, Inc., in 1997, he worked in mergers and acquisitions at Simmons & Company International.  He currently serves on the boards of Apollo Endosurgery, Inc., a publicly-tradedpublicly traded company, and several private companies.  Mr. McGaughy Jr. received his B.A. from theThe University of Texas (summa cum laude and member of Phi Beta Kappa) and his M.B.A. from the Harvard Business School.  Our board of directorsBoard believes that Mr. McGaughy Jr. is qualified to serve on our board of directorsBoard due to his extensive experience investing and extensive service on the boards of directors of other companies.

Jack B. Nielsen has served as a member of the Board of Directors since June 2006.  Mr. Nielsen is a partnerManaging Director in Vivo Capital, LLC, a healthcare focused investment firm.  Prior to March 1, 2017, Mr. Nielsen worked within the Novo A/S organization and its venture activities since 2001 in several roles, most recently being employed as a Senior Partner based in Copenhagen, Denmark.  From 2006 to 2012, Mr. Nielsen was employed as a Partner at Novo Ventures (US) Inc. in San Francisco, where he established the office which provides certain consultancy services to Novo A/S.  Mr. Nielsen in the past has served on the board of directors of Akebia Therapeutics, Inc., Crinetics Pharmaceuticals, Inc., Merus, N.V,N.V. and Apollo Endosurgery, Inc., each of which is a publicly-tradedpublicly traded company.  He is also currently a member of the board of directors of a number of private companies.  Mr. Nielsen received a M.Sc. in Chemical Engineering from the Technical University of Denmark, and a Masters in Management of Technology from the Center for Technology, Economics and Management;Management, Technical University of Denmark.  Our board of directorsBoard believes that Mr. Nielsen is qualified to serve on our boardBoard due to his extensive industry experience, his experience with venture capital investments, and his board service for several companies in the biotechnology sector.

William E. Rose has served as a member of the Board of Directors since February 2016.  Mr. Rose is the President of Montrose Capital, Inc.  Prior to Montrose, Mr. Rose was associated with HBK Capital Management from 1991 until 2012, serving in various capacities, including Co-Chief Investment Officer.  He currently serves as the Chairman ofon the Board of Trustees for Greenhill School and is also a member of the Investment Committee for the Dallas Museum of Art.  Mr. Rose received a B.A. in Political Science from Duke University in 1989.  Our board of directorsBoard believes that Mr. Rose is qualified to serve on our boardBoard due to his extensive experience investing, his experience with venture capital investments, and his board service for other enterprises.

Corporate Information

We were formed in Delaware in 2002 and maintain our principal corporate offices at 2801 Gateway5320 Legacy Dr., Suite 150, Irving,Plano, Texas 75063.75024.  Our Class A common stock is listed on The NASDAQNasdaq Global Market and is traded under the symbol “RETA.”  Our telephone number is 972-865-2219 and our internet website address is www.reatapharma.com.  We make available free of charge through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.  In addition to the reports filed or furnished with the SEC, we publicly disclose information from time to time in our press releases, at annual meetings of stockholders, in publicly accessible conferences and investor presentations, and through our website (principally in our “Investors & News” page).  References to our website in this Annual Report on Form 10-K are provided as a convenience and do not constitute, and should not be deemed, an incorporation by reference of the information contained on, or available through, the website, and such information should not be considered part of this Annual Report on Form 10-K.

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Item 1A. Risk Factors.

Investing in our Class A common stock involves a high degree of risk.  You should carefully consider the risks described below, as well as the other information in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes and Part

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II, Item 7 entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in any documents incorporated in this Annual Report on Form 10-K by reference, before deciding whether to invest in our Class A common stock.  The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations, and growth prospects.  In such an event, the market price of our Class A common stock could decline, and you may lose all or part of your investment.  Although we have discussed all known material risks, the risks described below are not the only ones that we may face.  Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also impair our business operations.  Certain statements below are forward-looking statements.  See also “Special“Cautionary Note Regarding Forward-Looking Statements” in this Annual Report on Form 10-K.

Risks Related to Our Financial Condition

We have incurred significant losses since our inception.  We anticipate that we will continue to incur losses for the foreseeable future and may never achieve or sustain profitability.  We will require additional financings to fund our operations.

We are a biopharmaceutical company with our lead product candidates, bardoxolone methyl and omaveloxolone, in clinical development.  Pharmaceutical product development is a highly risky undertaking.  To date, we have focused our efforts and most of our resources on developing our lead product candidates and on our earlier pipeline assets.  We are not profitable and have only had net income in the year ended December 31, 2014, due to recognition of deferred collaboration revenue.  Furthermore, other than in the years ended December 31, 2009, 2010, and 2012, due to cash received from our collaborations with AbbVie and KHK,KKC, we have had negative cash flows from operations in each year since our inception.  We have not generated any revenue based on product sales to date.  We continue to incur significant research and development and other expenses related to our ongoing operations.  For the years ended December 31, 2017, 2016,2019, 2018, and 2015,2017, our net loss was $47.7$290.2 million, $6.2$80.5 million, and $1.5$47.7 million, respectively.  As of December 31, 2017,2019, we had an accumulated deficit of $337.1$710.5 million and capital resources consisting of cash and cash equivalents of $129.8$664.3 million.  Despite cost coverage commitments from KHK and the potential to receive development cost sharing, milestone, and other payments from our collaborators,KKC, we anticipate that without taking into account deferred revenue, we will continue to incur losses for the foreseeable future, and we anticipate these losses will increase as we continue our development of, and seek regulatory approval for, and potentially commercialize our product candidates.  If we do not successfully develop and obtain regulatory approval for our existing or any future product candidates and effectively manufacture, market, and sell any products that are approved, we may never generate product sales, and even if we do generate product sales, we may never achieve or sustain profitability.  Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital.  Our failure to become and remain profitable wouldcould 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.

We believe that we will continue to expend substantial resources for the foreseeable future as we continue development and expand our clinical development efforts of our product candidates, seek regulatory approval and prepare for the commercialization of our product candidates, and pursue the development of additional molecules and treatment of additional indications.  These expenditures will include costs associated with research and development, conducting preclinical studies and clinical trials, seeking regulatory approvals in various jurisdictions, and manufacturing and supplying products and product candidates for ourselves and our collaborators.collaborators, and hiring personnel to prepare for commercialization of our product candidates.  The outcome of any clinical trial or regulatory approval process is highly uncertain, and we are unable to fully estimate the actual costs necessary to successfully complete the development and regulatory approval process, or the likelihood of success, for our product candidates in development and any future product candidates.  Our operating plans or third-party collaborations may change as a result of many factors, which are discussed in more detail below, and other factors that may not currently be known to us, and we therefore may need to seek additional funds sooner than planned through public or private offerings of securities, debt financings, royalty sales, or other sources, such as royalty monetization or other structured financings.sources.  Such financings may result in dilution to stockholders, imposition of debt covenants and repayment obligations, or other restrictions that may adversely

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affect our business.  We may seek additional capital due to favorable market conditions or strategic considerations even if we currently believe that we have sufficient funds for our current or future operating plans.

Our future funding requirements will depend on many factors, including, but not limited to:

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Additional funds may not be available when we require them or on terms that are acceptable to us.  If adequate funds are not available to us on a timely basis, we may be required to delay, limit, reduce, or terminate our research and development efforts or other operations or activities that may be necessary to commercialize our product candidates.

Substantially all of our recent revenue has been from collaboration arrangements for our product candidates under development.

During the past three completed fiscal years, substantially all of our revenue was from our collaborators, including $45.1$20.6 million, $48.2$26.6 million, and $48.1$45.1 million under the AbbVie licenseLicense Agreement and collaboration agreementsthe AbbVie Collaboration Agreement and $1.5$4.7 million, $1.5$24.7 million, and $1.5 million under the KHK agreement,KKC Agreement, constituting 97%95%, 100%96%, and 99%97% of our revenue, for each of the years ended December 31, 2017, 2016,2019, 2018, and 2015,2017, respectively.  Furthermore, this revenue only consists of the recognition of deferred revenue from nonrefundable upfront nonrefundableand milestone payments that we received from AbbVie and KHKKKC in prior years and nota milestone payment we received from new collaboration payments.KKC during 2018.

AbbVie is currently not participating in the development efforts for bardoxolone methyl or omaveloxolone.  If AbbVie continues not to jointly develop and commercialize bardoxolone methyl or omaveloxolone, we could require significant additional capital to proceed with the commercialization of our product candidates.  If adequate funds are not available to us on a timely basis or on favorable terms, we may be required to delay, limit, reduce, or terminate our efforts or other operations.49

If we are unable to continue to advance our development efforts and achieve development milestones under our collaboration agreements due to disagreements, or, if our collaborations are reprioritized by us or our collaborators or are renegotiated, our revenue may decrease and our activities may fail to lead to commercial products.

Revenue from research and development collaborations depends upon continuation of the collaborations, reimbursement of development costs from KHK, the achievement of milestones, and royalties and profits from our product sales, if any, derived from future products developed from our research.  Collaboration agreements are often complex relationships intended to last for a long term; as a result, we may have disagreements, or our collaborations may be reprioritized by us or our collaborators or renegotiated from time to time to change economic and other terms.  If we are unable to successfully advance the development of our product candidates or achieve milestones, or, if our collaboration agreements are renegotiated, such as we recently completed with AbbVie, we may not receive some or all of the revenue currently contemplated under our collaboration agreements.  A significant portionAll of the milestone payments that could occur under our existing contractual arrangements arise from our KHK agreement.KKC Agreement.

Payments under the instruments governing our indebtednessor other payment obligations may reduce our working capital.  In addition, a default under our First Amendment to Amended and Restated Loan and Security Agreement (the Amended Restated Loan Agreement) could cause a material adverse effect on our financial position.

In March 2017, we entered into the Loan Agreement, under which the Lenders agreeda loan and security agreement (Loan Agreement) with Oxford Finance LLC and Silicon Valley Bank to lend usborrow up to $35$35.0 million, issuable in two separate tranchesterm loans of $20$20.0 million (Term A Loan) and $15$15.0 million (Term B Loan).  On March 31, 2017, we borrowed the $20 million fromLoan, and together with the Term A Loan.Loan, the Term Loans).  In November 2017, the Companywe amended the Loan Agreement (Amended Loan Agreement) and increased the Term B Loan to either $20.0 million or $25.0 million.  In June 2018, we entered into an Amended and Restated Loan and Security Agreement (the Restated Loan Agreement) and increased the Term A Loan to $80.0 million and the Term B Loan to $45.0 million.  In October 2019, we amended the Restated Loan Agreement to increase the Term B Loan amount to either $20$75.0 million or $25 million, which extends the interest only period from six to twelve months if the Term B(the Amended Restated Loan is drawn.  The Company may, at its sole discretion, borrow $20 million under Term B Loan by June 29, 2018.  Agreement).

We may borrow an additional $5have borrowed $155.0 million under the Term BAmended Restated Loan for a total of $25 million, upon the achievement of one of two milestones by the earlier of 90 days after the achievement of a milestone or June 29, 2018.

Agreement.  Our obligations under the Amended Restated Loan Agreement are secured by a first priority security interest in substantially all of our current and future assets, other thanincluding our owned intellectual property.  We have also agreed not to encumber our intellectual property assets, except as permitted by the Loan Agreement.  All outstanding Term Loans will mature on MarchJune 1, 2022.2023.  We will make interest-only payments for 1836 months through NovemberJune 1, 2018; however, if we draw the Term B Loan, we will make interest-only payments for 30 months through October 1, 2019.2021.  The interest-only payment period will be followed by 4124 equal monthly payments or 29 equal monthly payments if we draw the Term B Loan, of principal and interest payments.interest.  Payments under the Amended Restated Loan Agreement could result in a significant reduction of our working capital.

The Amended Restated Loan Agreement requires us, and any debt arrangements we may enter into in the future may require us, to comply with various covenants that limit our ability to, among other things:

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These restrictions could inhibit our ability to pursue our business strategies.  If we default under our obligations under the Amended Restated Loan Agreement, the lendersLenders could proceed against the collateral granted to them to secure our indebtedness or declare all obligation under the Amended Restated Loan Agreement to be due and payable.  In certain circumstances, procedures by the lendersLenders could result in a loss by us of all of our equipment and inventory, which are included in the collateral granted to the lenders.Lenders.  If any indebtedness under the Amended Restated Loan Agreement were to be accelerated, there can be no assurance that our assets would be sufficient to repay in full that indebtedness.  In addition, upon any distribution of assets pursuant to any liquidation, insolvency, dissolution, reorganization, or similar proceeding, the holders of secured indebtedness will be entitled to receive

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payment in full from the proceeds of the collateral securing our secured indebtedness before the holders of other indebtedness or our common stock will be entitled to receive any distribution with respect thereto.thereto.

In October 2019, we entered into the Reacquisition Agreement, under which we reacquired the development, manufacturing, and commercialization rights concerning our proprietary Nrf2 activator product platform originally licensed to AbbVie.  In exchange for such rights, we agreed to pay AbbVie $330.0 million, of which we paid $100.0 million in 2019, $150.0 million is payable on June 30, 2020, and $80.0 million is payable on November 30, 2021.  These payments may have an adverse effect on our liquidity and may require us to incur additional debt or issue additional equity to fund the payments.  If we fail to make the payments, then all such rights will revert to AbbVie.

Risks Related to the Development and Commercialization of Our Product Candidates

We are substantially dependent on the success of our lead product candidates, bardoxolone methyl and omaveloxolone.

To date, we have invested a substantial portion of our efforts and financial resources in the research and development of bardoxolone methyl and omaveloxolone, which are currently our lead product candidates.  These are our lead product candidates that have advanced into registrational clinical development, and it maybut there can be no assurance that further clinical trials will not be required, or that regulatory delays will not be incurred.  It could be years before the trials required for their approval are completed, if ever.  Our other clinical and preclinical programs are less advanced in development and may never enter into registrational clinical trials.  Although we believe that Nrf2 activators have many potential clinical applications, we may fail to pursue successful indications and may miss opportunities for development in other indications as a result of limited resources.  We also may fail to focus our efforts by attempting to develop single product candidates in multiple indications and formulations without success.

Our near-term prospects are dependent upon successful interactions with global regulatory authorities and on successful registrational development and commercialization of bardoxolone methyl and omaveloxolone.  We may need to complete additional or larger and more extensive controlled clinical trials to validate the results observed in clinical trials to date to continue further development and seek regulatory approval of these product candidates.  We have announced positive results from the first year of our CARDINAL Phase 3 trial of bardoxolone in patients with CKD caused by Alport syndrome and from our MOXIe trial of omaveloxolone in patients with FA and are in discussions with the FDA regarding these results.  However, there can be no assurance that we will submit an NDA for either of these indications, or, if an NDA is submitted, that it will be accepted by the FDA, or, if accepted, that the NDA will be approved by the FDA.  In addition, although there may be many potentially promising indications beyond those listed above,we are currently investigating, we are still exploring indications for which further development of, and investment for, our lead product candidates may be appropriate.  Accordingly, the costs and time to complete development and the related risks are currently unknown.

The clinical and commercial success of bardoxolone methyl and omaveloxolone will depend on a number of factors, many of which are beyond our control.

The clinical and commercial success of bardoxolone methyl and omaveloxolone will depend on a number of factors, including the following, many of which are beyond our control:

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We cannot assure you that we will ever be able to achieve profitability through the sale of, or royalties from, our product candidates.  If we or our collaborators are not successful in obtaining approval for and commercializing our product candidates, or are delayed in completing those efforts, our business and operations would be adversely affected.

If our product candidates receive regulatory approval, we will be subject to ongoing regulatory requirements and we may face future development, manufacturing, and regulatory difficulties.

Our product candidates, if approved, will also be subject to ongoing regulatory requirements for labeling, packaging, storage, advertising, promotion, sampling, record-keeping, submission of safety and other post-market approval information, importation, and exportation.  In addition, approved products, manufacturers, and manufacturers’ facilities are required to comply with extensive FDA, EMA, United Kingdom Medicines and Healthcare Products Regulatory Agency, Japanese Pharmaceuticals and Medical Devices Agency (PMDA),PMDA, and Australian Therapeutic Goods Administration (TGA), requirements and the requirements of other similar agencies, including ensuring that quality control and manufacturing procedures conform to CGMP requirements.  As such, we and our potential future contract manufacturers will be subject to continual review and periodic inspections to assess compliance with CGMPs.  Accordingly, we and others with whom we work will be required to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control.  We will also be required to report certain adverse reactions and production problems, if any, to the FDA, EMA, PMDA, TGA, and other similar agencies and to comply with certain requirements concerning advertising and promotion for our product candidates.  Promotional communications with respect to prescription drugs also are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved labeling.  Accordingly, once approved, we may not promote our products, if any, for indications or uses for which they are not approved.

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If a regulatory agency discovers previously unknown problems with a product, such as AEs of unanticipated severity or frequency or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing, or labeling of a product, it may impose restrictions on that product or us, including requiring withdrawal of the product from the market.  If our product candidates fail to comply with applicable regulatory requirements, a regulatory agency may:

Success in earlier Phase 1 and 2 clinical trials for our product candidates, bardoxolone methyl and omaveloxolone, may not be indicative of the results that may be obtained in larger registrational clinical trials, which may delay or prevent obtaining regulatory approval.

Clinical development is expensive and can take many years to complete, and its outcome is inherently uncertain.  Failure can occur at any time during the clinical trial process.  Success in preclinical studies and early clinical trials may not be predictive of results in larger clinical trials, and successful results from early or small clinical trials may not be replicated or show as favorable an outcome in larger clinical trials, even if successful.  For example, we have previously endeavored to develop bardoxolone methyl for the treatment of CKD caused by type 2

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diabetes.T2D CKD.  While bardoxolone methyl appeared to be safe and effective throughout Phase 2 clinical development for kidney disease, we encountered heart failure related to fluid overload during the pivotal Phase 3 trial, known as BEACON, that resulted in the termination of the T2D CKD caused by type 2 diabetes program.  Heart failure appeared to occur at a very low rate in only a particular type of patient studied during BEACON, which was not observed during Phase 2.  Our other Phase 2 clinical programs with bardoxolone methyl and omaveloxolone have involved a relatively small number of patients exposed for a relatively short period of time compared to the Phase 3 clinical trials that we may need to conduct.  Accordingly, the Phase 2 clinical trials that we have conducted may not have uncovered safety issues, even if they exist.  The biochemical pathways that we believe are affected by bardoxolone methyl and omaveloxolone are implicated in a variety of biological processes and disease conditions, and it is possible that the use of our product candidates to treat larger numbers of patients will demonstrate unanticipated adverse effects, including possible drug-drug interactions, which may negatively affect their safety profile.

In addition, we cannot assure that any potential advantages that we believe bardoxolone methyl may have for our current clinical programs will be substantiated by each of our registrational clinical trials or that we will be able to include a discussion of any advantages in our labeling should we obtain approval.  We cannot assure you that our previous data in our Phase 2 trial and our trials in T2D CKD caused by type 2 diabetes may predict effects in our registrational trial in patients with CKD caused by Alport syndrome.ADPKD or other forms of CKD.  In addition, based on the data from our ongoing Phase 2 clinical trial in PAH, and PH-ILD, we believe that bardoxolone, methyl, combined with current standard of care, may have benefits compared to treatment with current standard of care.  However, our belief that bardoxolone methyl may offer those benefits is based on a limited amount of data from our Phase 2 trial and our understanding of the likely mechanisms of action for bardoxolone, methyl, and such data may not be replicated in our Phase 3 trial.  Additionally, while we have discussed the PAH

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and CKD caused by Alport syndrome trial data with the FDA, EMA and the PMDA weand ADPKD trial data with the FDA.  Discussions with the FDA of the one-year results of our CARDINAL Phase 3 trial in patients with CKD caused by Alport syndrome are ongoing.  Preliminary discussions with the EMA have not yet discussedindicated that additional discussion will be needed and additional nonclinical and clinical studies may be required in advance of a Marketing Authorization Application (MAA) for CKD caused by Alport syndrome in that territory.  We have had limited or no discussions of these trial data with any other global regulatory health authority,authorities, and these regulatory bodies may not concur that these studies would be adequate to support a marketing application or that the benefits would translate to approvable trial endpoints or be reflected on our product label.

In addition, we cannot assure that the potential advantages that we believe omaveloxolone may have will be substantiated by each of our registrational clinical trials or that we will be able to include a discussion of such advantages in our labeling should we obtain approval.  Additionally, while we have discussed FA and melanoma trial data with the FDA weand FA trial data with the EMA.  Discussions with the FDA of the results of our MOXIe Phase 2 trial in patients with FA are ongoing. Preliminary discussions with the EMA have not yet discussed any trialindicated that additional discussion will be needed and additional nonclinical or clinical studies may be required in advance of a MAA for FA in that territory.  We have had limited or no discussions of these data with other global regulatory health authorities, and these regulatory bodies may not concur that these studies would be adequate to support a marketing application or that the benefits would translate to approvable trial endpoints or be reflected on our product label.

Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in early stage development, or after achieving positive results in pivotal trials, and we have had, and may face, similar setbacks.  In addition, the patient populations under investigation with bardoxolone methyl and omaveloxolone have many co-morbidities that may cause severe illness or death, which may be attributed to bardoxolone methyl and omaveloxolone in a manner that negatively affects the safety profile of our product candidate.  If the results of our ongoing or future clinical trials for bardoxolone methyl and omaveloxolone are inconclusive with respect to efficacy, if we do not meet our clinical endpoints with statistical significance, or if there are unanticipated safety concerns or AEs that emerge during clinical trials, we may be prevented from or delayed in obtaining marketing approval, and even if we obtain marketing approval, any sales may suffer.

We may face delays in completing our ongoing or planned clinical trials with bardoxolone methyl and omaveloxolone due to a number of factors, or these studies may not be completed at all.

Clinical trials can be delayed, suspended, or terminated for a variety of reasons, including delay or failure to:

In addition, we could encounter delays if a clinical trial is suspended or terminated by us, by the relevant IRBs at the sites at which such studies are being conducted, or by the FDA or other regulatory authorities.  A suspension or termination of clinical trials, including imposition of a clinical hold, may result from any number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities, unforeseen safety issues or adverse side effects, changes in laws or regulations, or a principal investigator’s determination that an SAE could be related to our product candidates.  Any delays in completing our clinical trials will increase the costs of the trial, delay or prevent the product candidate’s development and approval, and jeopardize our ability to commence

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marketing and generate revenue.  Any of these occurrences may materially and adversely harm our business and operations and prospects.

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Our product candidates may cause or have attributed to them undesirable side effects or have other properties that delay or prevent their regulatory approval or limit their commercial potential.

Undesirable side effects caused by our product candidates or that may be identified as related to our product candidates by investigators conducting our clinical trials or even related to competing products in development that utilize a similar mechanism of action or act through a similar biological disease pathway could cause us or regulatory authorities to interrupt, delay, or halt clinical trials and could result in the delay or denial of regulatory approval by the FDA or other regulatory authorities and potential product liability claims.  AEs and SAEs that emerge during treatment with our product candidates or other compounds acting through similar biological pathways may be deemed to be related to our product candidate.  This may require longer and more extensive Phase 3 clinical development, or regulatory authorities may increase the amount of data and information required to approve, market, or maintain our product candidates and could result in negative labeling or a restrictive REMS.  This may also result in an inability to obtain approval of our product candidates.

The occurrence of any or all of these events may cause the development of our product candidates to be delayed or terminated, which could materially and adversely affect our business and prospects.  Our product candidates have in the past and may in the future be deemed to cause adverse effects and SAEs.

Clinical trials of our product candidates may not uncover all possible adverse effects that patients may experience.

Clinical trials are conducted in representative samples of the potential patient population, which may have significant variability.  By design, clinical trials are based on a limited number of subjects and are of limited duration of exposure to the product, to determine whether the product candidate demonstrates the substantial evidence of efficacy and safety necessary to obtain regulatory approval.  As with the results of any statistical sampling, we cannot be sure that all side effects of our product candidates may be uncovered.  It may be the case that only with a significantly larger number of patients exposed to the product candidate for a longer duration may a more complete safety profile be identified.  Further, even larger clinical trials may not identify rare SAEs, and the duration of such studies may not be sufficient to identify when those events may occur.  Other products have been approved by the regulatory authorities for which safety concerns have been uncovered following approval.  Such safety concerns have led to labeling changes, restrictions on distribution through use of a REMS, or withdrawal of products from the market, and any of our product candidates may be subject to similar risks.

Although to date we have not seen evidence of significant safety concerns with our product candidates in the patient populations currently undergoing clinical trials with bardoxolone methyl or omaveloxolone beyond those seen in BEACON, patients treated with our products, if approved, may experience previously unreported adverse reactions, and it is possible that the FDA or other regulatory authorities may ask for additional safety data as a condition of, or in connection with, our efforts to obtain approval of our product candidates.  If safety problems occur or are identified after our products, if any, reach the market, we may make the decision or be required by regulatory authorities to amend the labeling of our products, recall our products, or even withdraw approval for our products.

We may fail to enroll a sufficient number of patients in our clinical trials in a timely manner, which could delay or prevent clinical trials of our product candidates.

Identifying and qualifying patients to participate in clinical trials of our product candidates is critical to our success.  The timing of our clinical trials depends on the rate at which we can recruit and enroll patients in testing our product candidates.  Patients may be unwilling to participate in clinical trials of our product candidates for a variety of reasons, some of which may be beyond our control, including: