Reata Pharmaceuticals (RETA) 10-Q 10 May 17 2017 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2017	May 08, 2017
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2017
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q1
Trading Symbol	RETA
Entity Registrant Name	REATA PHARMACEUTICALS INC
Entity Central Index Key	1,358,762
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Common Stock A
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		13,991,575
Common Stock B
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		8,374,032

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Assets
Cash and cash equivalents	$ 82,676	$ 84,732
Prepaid expenses and other current assets	3,041	2,551
Total current assets	85,717	87,283
Property and equipment, net	703	819
Other assets	1,760	991
Total assets	88,180	89,093
Liabilities and stockholders’ deficit
Accounts payable	541	3,830
Accrued direct research liabilities	5,443	6,151
Other current liabilities	3,885	3,047
Current portion of deferred revenue	41,323	46,603
Total current liabilities	51,192	59,631
Other long-term liabilities	51	72
Term loan, net of discounts and debt issuance costs	19,753
Deferred revenue, net of current portion	237,489	244,438
Total noncurrent liabilities	257,293	244,510
Commitments and contingencies
Stockholders’ deficit:
Additional paid-in capital	76,252	74,298
Shareholder notes receivable	(15)	(15)
Accumulated deficit	(296,565)	(289,354)
Total stockholders’ deficit	(220,305)	(215,048)
Total liabilities and stockholders’ deficit	88,180	89,093
Common Stock A
Stockholders’ deficit:
Common stock value	14	12
Common Stock B
Stockholders’ deficit:
Common stock value	$ 9	$ 11

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2017	Dec. 31, 2016
Common Stock A
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	13,988,839	11,687,974
Common stock, shares outstanding	13,988,839	11,687,974
Common Stock B
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	8,376,768	10,656,920
Common stock, shares outstanding	8,376,768	10,656,920

Unaudited Consolidated Statemen

Unaudited Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Collaboration revenue
License and milestone	$ 12,729	$ 12,365
Other revenue	3	73
Total collaboration revenue	12,732	12,438
Expenses
Research and development	14,603	9,306
General and administrative	5,173	3,207
Depreciation and amortization	130	188
Total expenses	19,906	12,701
Other income (expense)
Investment income	81	23
Interest expense	(5)
Total other income (expense)	76	23
Loss before provision for taxes on income	(7,098)	(240)
Provision for taxes on income		18
Net loss	$ (7,098)	$ (258)
Net loss per share—basic and diluted	$ (0.32)	$ (0.02)
Weighted-average number of common shares used in net loss per share basic and diluted	22,350,436	15,990,766

Unaudited Consolidated Stateme5

Unaudited Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Operating activities
Net loss	$ (7,098)	$ (258)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	130	188
Stock-based compensation expense	1,603	289
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(490)	(482)
Other assets	(769)
Accounts payable	(3,289)	(2,985)
Accrued direct research and other current liabilities	84	1,211
Federal income tax receivable/payable		15,218
Deferred revenue	(12,229)	(12,364)
Net cash (used in) provided by operating activities	(22,058)	817
Investing activities
Purchases of property and equipment	(34)	(16)
Net cash used in investing activities	(34)	(16)
Financing activities
Proceeds from long-term debt, net of discount	19,840
Payments on deferred offering costs		(911)
Exercise of options	241
Payment of capital lease obligation	(45)	(45)
Net cash provided by (used in) financing activities	20,036	(956)
Net decrease in cash and cash equivalents	(2,056)	(155)
Cash and cash equivalents at beginning of year	84,732	42,008
Cash and cash equivalents at end of period	82,676	41,853
Supplemental disclosures
Cash paid for interest	5
Unpaid debt issuance costs	$ 87
Income taxes paid		18
Purchases of equipment in accounts payable and other current liabilities		24
Accrued deferred offering costs		$ 887

Description of Business

Description of Business	3 Months Ended
	Mar. 31, 2017
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Description of Business	1. Description of Business Reata Pharmaceuticals, Inc. (the Company) is a clinical stage biopharmaceutical company located in Irving, Texas focused on identifying, developing, and commercializing product candidates to address rare and life-threatening diseases with few or no approved therapies by targeting molecular pathways that regulate cellular metabolism and inflammation. The Company operates as a single segment of business. The Company’s lead product candidates, bardoxolone methyl and omaveloxolone, are Nrf2 activators that target the important transcription factor Nrf2 to restore mitochondrial function, reduce oxidative stress, and resolve inflammation. Bardoxolone methyl is in Phase 3 clinical development for the treatment of pulmonary arterial hypertension associated with connective tissue disease (CTD-PAH), and Phase 2 clinical development for the treatment of PAH and pulmonary hypertension due to interstitial lung disease (PH-ILD). The Company began enrolling patients in its Phase 3 trial in CTD-PAH in October 2016. In addition, bardoxolone methyl is being studied in a single, pivotal Phase 2/3 trial in chronic kidney disease (CKD) caused by Alport syndrome, in which the Company began enrolling patients in March 2017. Omaveloxolone is being studied in separate two-part Phase 2 trials for the treatment of Friedreich’s ataxia (FA) and mitochondrial myopathies (MM), known as MOXIe and MOTOR, respectively. The Company has completed enrollment of part one in MOXIe and is currently dosing patients in part one of MOTOR, both of which are dose ranging. Data from part two of each of the trials have the potential to be used for registration. Omaveloxolone is also being studied in a Phase 1b/2 trial for the treatment of metastatic melanoma, known as REVEAL. In addition to its lead product candidates, the Company is in Phase 1 development for RTA 901. Beyond our clinical programs, the Company has additional promising preclinical development programs. The Company believes its product candidates and preclinical programs have the potential to improve clinical outcomes in numerous underserved patient populations. The Company’s consolidated financial statements include the accounts of all majority-owned subsidiaries that are required to be consolidated. Accordingly, the Company’s share of net earnings and losses from these subsidiaries is included in the consolidated statements of operations. Intracompany profits, transactions, and balances have been eliminated in consolidation. On May 25, 2016, the Company’s registration statement on Form S-1 (File No. 333-208843) relating to its initial public offering (IPO) of its common stock was declared effective by the U.S. Securities and Exchange Commission (SEC). The shares began trading on The NASDAQ Global Market on May 26, 2016. The public offering price of the shares sold in the offering was $11.00 per share. The IPO closed on June 1, 2016, for 6,325,000 shares of its Class A common stock, which included 825,000 shares of its Class A common stock issued pursuant to the over-allotment option granted to the underwriters. The Company received total proceeds from the offering of $60.9 million, net of underwriting discounts and commissions and offering expenses.

Summary of Significant Accounti

Summary of Significant Accounting Policies	3 Months Ended
	Mar. 31, 2017
Accounting Policies [Abstract]
Summary of Significant Accounting Policies	2. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2017, are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. The consolidated balance sheet at December 31, 2016, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the annual consolidated financial statements and footnotes thereto of the Company. Revenue Recognition The Company’s revenue to date has been generated primarily through collaborative licensing agreements with AbbVie Ltd. (AbbVie) and Kyowa Hakko Kirin Co., Ltd. (KHK). Revenues for periods shown consist of the recognition of deferred revenue from upfront payments and milestone payments received in 2012 and prior years. The Company has not generated any revenue based on the sale of products. In June 2013, the Company entered into a research collaboration with a disease advocacy organization. Under the agreement, the Company may be provided milestone payments to fund research and development activities estimated over a two-year period. The Company recorded collaboration revenue totaling $500,000 related to milestone payments during the three months ended March 31, 2017. Research and Development Costs AbbVie is not currently participating in the development of bardoxolone methyl for the treatment of CKD caused by Alport syndrome, PAH, or PH-ILD, and we are therefore incurring all costs for this program. With respect to its omaveloxolone programs and its collaboration agreement with AbbVie, the Company was responsible for a certain initial amount in early development costs before AbbVie began sharing development costs equally. As of April 2016, the Company had incurred all of these initial costs, after which payments from AbbVie with respect to research and development costs incurred by the Company were recorded as a reduction in research and development expenses. In September 2016, the Company and AbbVie mutually agreed that the Company 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 U.S., or the Company 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. For the quarters ended March 31, 2017 and 2016, no payments related to shared research and developments costs were received. The Company bases its expense accruals related to clinical trials on its estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and contract research organizations that conduct and manage clinical trials on its behalf. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing costs, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the Company does not identify costs that it has begun to incur or if the Company underestimates or overestimates the level of services performed or the costs of these services, its actual expenses could differ from its estimates. To date, the Company has not experienced significant changes in its estimates of accrued research and development expenses after a reporting period. However, due to the nature of estimates, the Company cannot assure that it will not make changes to its estimates in the future as the Company becomes aware of additional information about the status or conduct of its clinical trials and other research activities. Stock-Based Compensation The Company accounts for its equity-based compensation awards in accordance with Accounting Standard Codification ASC 718 Compensation—Stock Compensation The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock option awards, which takes into consideration various factors, including the exercise price of the award, the expected term of the award, the current price of the underlying shares, the expected volatility of the underlying share price based on peer companies, and the risk-free interest rate. The Company accounts for forfeitures of share-based awards when they occur. Prior to the Company’s IPO of its common stock, the fair values of the shares of common stock underlying the Company’s share-based awards were estimated on each grant date using a probability-weighted expected return method. Following the close of its IPO in June 2016, the fair values of its common stock underlying its share-based awards were estimated using observable market prices. Risks and Uncertainties The Company has experienced losses and negative operating cash flows for many years since inception and has no marketed drug or other products. The Company’s ability to generate future revenue depends upon the results of its development programs, the success of which cannot be guaranteed. The Company will need to raise additional equity or debt capital in the future in order to fund its operations. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Fair Value of Financial Instruments The fair values of the Company’s stockholder notes receivable were approximately $30,000 and $28,000 at March 31, 2017 and December 31, 2016, respectively. The fair value was calculated using an income approach to estimate the present value of expected future cash flows to be received under the notes. The measurement is considered to be based primarily on Level 3 inputs used in the calculation, including the discount rate applied and the estimate of future cash flows. Net Loss per Share Basic and diluted net loss per common share is calculated by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period, without consideration for common stock equivalents. The Company’s potentially dilutive shares, which include unvested restricted stock and options to purchase common stock, are considered to be common stock equivalents and are only included in the calculation of diluted net income (loss) per share when their effect is dilutive. For periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company uses the two-class method to compute net loss per common share attributable to common stockholders because the Company has issued securities, other than Class A and Class B common stock, that contractually entitle the holders to participate in dividends and earnings of the Company. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings. Holders of restricted common stock are entitled to the dividend amount paid to common stockholders on an as-if-converted-to-common stock basis when declared by the Company’s Board of Directors. As a result, all restricted common stock are considered to be participating securities. Deferred Offering Costs Deferred offering costs, which primarily consist of direct incremental accounting, legal, and printing fees relating to the IPO, were initially capitalized. The deferred offering costs totaling $3,489,000 were subsequently offset against IPO proceeds upon the completion of the IPO on June 1, 2016. Debt Issuance Costs The Company defers costs related to debt issuance and amortizes these cost to interest expense over the term of the debt, using the effective interest method. Debt issuance costs are presented in the balance sheet as a deduction from the carrying amount of the debt liability. Recent Accounting Pronouncements The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has irrevocably elected not to avail itself of this exemption from new or revised accounting standards, and, therefore, will be subject to the same new or revised accounting standards as public companies that are not emerging growth companies. In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers Revenue Recognition The new standard is effective for interim and annual periods beginning after December 15, 2017, with early application for interim and annual periods beginning after December 15, 2016, permitted, and allows two methods of adoption: the full retrospective method, which requires the standard to be applied to each prior period presented, or the modified retrospective method, which requires the cumulative effect of adoption to be recognized as an adjustment to opening retained earnings in the period of adoption. The Company has begun an initial review of its existing contracts with AbbVie and KHK and has not yet determined what, if any, effect ASU 2016-09 will have on its consolidated results of operations or financial position. In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs In February 2016, the FASB issued ASU No. 2016-02, Leases Leases In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments In January 2017, the FASB issued ASU No. 2017-03, Accounting Changes and Error Corrections and Investments—Equity Method and Joint Ventures Revenue from Contracts with Customers Leases Financial Instruments—Credit Losses Measurement of Credit Losses on Financial Instruments

Term Loan

Term Loan	3 Months Ended
	Mar. 31, 2017
Debt Disclosure [Abstract]
Term Loan	3. Term Loan On March 31, 2017, the Company entered into a loan and security agreement (Loan Agreement) with Oxford Finance LLC and Silicon Valley Bank (collectively, Lenders), under which the Lenders agreed to lend the Company up to $35,000,000, issuable in two separate term loans of $20,000,000 (Term A Loan) and $15,000,000 (Term B Loan). On March 31, 2017, the Company borrowed $20,000,000 from the Term A Loan. Beginning July 1, 2017, under the Term of the Loan Agreement, the Company may, as its sole discretion, borrow $15,000,000 under Term B Loan following the achievement of first patient enrollment in either (a) the Phase 3 portion of the ongoing Phase 2/3 clinical trial of bardoxolone methyl in CKD caused by Alport syndrome or (b) Part 2 of the ongoing two-part clinical trial, or a separate Phase 3 clinical trial, of omavaloxolone in FA until the earlier of 90 days thereafter or March 31, 2018. All outstanding Term Loans will mature on March 1, 2022. Under the Term A Loan, the Company will make interest-only payments for 18 months through November 1, 2018; however, if the Company draws the Term B Loan, the Company will make interest-only payments for 24 months through May 1, 2019. The interest-only payment period will be followed by 41 equal monthly payments, or 35 equal monthly payments if the Company draws the Term B Loan, of principal and interest payments. The Term Loans will bear interest at a floating per annum rate calculated as 7.40% plus the greater of the 30-day U.S. Dollar LIBOR rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue or 0.75%, with a minimum rate of 8.15% and maximum rate of 10.15%. The Company has the option to prepay all, but not less than all, of the borrowed amounts, provided that the Company will be obligated to pay a prepayment fee equal to (a) 3.0% of the outstanding principal balance of the applicable Term Loan if prepayment is made prior to the first anniversary of the applicable funding date of the Term Loan, (b) 2.0% of the outstanding principal balance of the applicable Term Loan if prepayment is made prior to the second anniversary of the applicable funding date of the Term Loan, or (c) 1.0% of the outstanding principal balance of the applicable Term Loan if prepayment is made prior to the third anniversary of the applicable funding date of the Term Loan. The Company will also be required to make a final exit fee payment of 2.95% of the principal balance of all Term Loans outstanding, payable on the earliest of the prepayment of the Term Loans, acceleration of any Term Loan, or at maturity of the Term Loans. The Company may use the proceeds from the Term Loans for working capital and to fund its general business requirements. The Company’s obligations under the Loan Agreement are secured by a first priority security interest in substantially all of its current and future assets, other than its owned intellectual property. The Company has also agreed not to encumber its intellectual property assets, except as permitted by the Loan Agreement. As of March 31, 2017, the Company had $20,000,000 outstanding under the Term A Loan, which was recorded at its initial carrying value of $20,000,000, less discount and debt issuance costs totaling approximately $247,000. In connection with the Term A Loan, the discount and debt issuance costs were recorded as a reduction to debt on its balance sheet and are being accreted to interest expense over the life of the Term A Loan. Additionally, the final exit fee of approximately $590,000 is being accrued over the life of the Term A Loan through interest expense. The Term A Loan has a current effective interest rate of 9.94%. The Company is in compliance with all covenants under the Loan Agreement as of March 31, 2017. The future principal payments for the Company’s Term A Loan as of March 31, 2017 are as follows (in thousands): 2017 $ — 2018 975 2019 5,854 2020 5,854 2021 5,854 2022 1,463 $ 20,000

Income Taxes

Income Taxes	3 Months Ended
	Mar. 31, 2017
Income Tax Disclosure [Abstract]
Income Taxes	4. Income Taxes The Company’s effective tax rate varies with the statutory rate due primarily to the impact of nondeductible stock-based compensation and the changes in valuation allowance related to certain deferred tax assets generated or utilized in the applicable period. The Company’s deferred tax assets have been fully offset by a valuation allowance at March 31, 2017, and the Company expects to maintain this valuation allowance until there is sufficient evidence that future earnings can be achieved, which is uncertain at this time.

Stock-Based Compensation

Stock-Based Compensation	3 Months Ended
	Mar. 31, 2017
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Stock-Based Compensation	5. Stock-Based Compensation Stock Options The following table summarizes stock-based compensation expense reflected in the consolidated statements of operations (in thousands): Three Months ended March 31, 2017 2016 Research and development $ 570 $ 138 General and administrative 1,033 151 $ 1,603 $ 289 The following table summarizes stock option activity as of March 31, 2017, and changes during the three months ended March 31, 2017, under the 2007 Long Term Incentive Plan (the 2007 LTIP) and standalone option agreements: Number of Options Weighted- Average Exercise Price Outstanding at January 1, 2017 2,311,146 17.18 Granted 60,169 26.31 Exercised (20,713 ) 11.62 Forfeited (2,225 ) 11.98 Expired — — Outstanding at March 31, 2017 2,348,377 17.46 Exercisable at March 31, 2017 552,887 16.72 The total intrinsic value of all outstanding options and exercisable options at March 31, 2017 was $13,901,000 and $4,686,000, respectively.

Related-Party Transactions

Related-Party Transactions	3 Months Ended
	Mar. 31, 2017
Related Party Transactions [Abstract]
Related-Party Transactions	6. Related-Party Transactions During the three months ended March 31, 2017, the Company did not have any related party transactions. During the three months ended March 31, 2016, the Company paid approximately $115,000 to AbbVie, a greater than 10% shareholder of the Company at that time, for manufacturing services. The payments are recorded in research and development expense in the accompanying consolidated statements of operations.

Net Loss per Share

Net Loss per Share	3 Months Ended
	Mar. 31, 2017
Earnings Per Share [Abstract]
Net Loss per Share	7. Net Loss per Share The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders: Three Months ended March 31, 2017 2016 Numerator Net loss (in thousands) $ (7,098 ) $ (258 ) Denominator Weighted-average number of common shares used in net loss per share – basic 22,350,436 15,990,766 Dilutive potential common shares — — Weighted-average number of common shares used in net loss per share – diluted 22,350,436 15,990,766 Net loss per share – basic (0.32 ) (0.02 ) Net loss per share – diluted (0.32 ) (0.02 ) The number of weighted average options that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive represented 2,348,377 and 2,311,146 shares for the three months ended March 31, 2017 and 2016.

Summary of Significant Accoun13

Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2017
Accounting Policies [Abstract]
Basis of Presentation	Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2017, are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. The consolidated balance sheet at December 31, 2016, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the annual consolidated financial statements and footnotes thereto of the Company.
Revenue Recognition	Revenue Recognition The Company’s revenue to date has been generated primarily through collaborative licensing agreements with AbbVie Ltd. (AbbVie) and Kyowa Hakko Kirin Co., Ltd. (KHK). Revenues for periods shown consist of the recognition of deferred revenue from upfront payments and milestone payments received in 2012 and prior years. The Company has not generated any revenue based on the sale of products. In June 2013, the Company entered into a research collaboration with a disease advocacy organization. Under the agreement, the Company may be provided milestone payments to fund research and development activities estimated over a two-year period. The Company recorded collaboration revenue totaling $500,000 related to milestone payments during the three months ended March 31, 2017.
Research and Development Costs	Research and Development Costs AbbVie is not currently participating in the development of bardoxolone methyl for the treatment of CKD caused by Alport syndrome, PAH, or PH-ILD, and we are therefore incurring all costs for this program. With respect to its omaveloxolone programs and its collaboration agreement with AbbVie, the Company was responsible for a certain initial amount in early development costs before AbbVie began sharing development costs equally. As of April 2016, the Company had incurred all of these initial costs, after which payments from AbbVie with respect to research and development costs incurred by the Company were recorded as a reduction in research and development expenses. In September 2016, the Company and AbbVie mutually agreed that the Company 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 U.S., or the Company 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. For the quarters ended March 31, 2017 and 2016, no payments related to shared research and developments costs were received. The Company bases its expense accruals related to clinical trials on its estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and contract research organizations that conduct and manage clinical trials on its behalf. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing costs, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the Company does not identify costs that it has begun to incur or if the Company underestimates or overestimates the level of services performed or the costs of these services, its actual expenses could differ from its estimates. To date, the Company has not experienced significant changes in its estimates of accrued research and development expenses after a reporting period. However, due to the nature of estimates, the Company cannot assure that it will not make changes to its estimates in the future as the Company becomes aware of additional information about the status or conduct of its clinical trials and other research activities.
Stock-Based Compensation	Stock-Based Compensation The Company accounts for its equity-based compensation awards in accordance with Accounting Standard Codification ASC 718 Compensation—Stock Compensation The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock option awards, which takes into consideration various factors, including the exercise price of the award, the expected term of the award, the current price of the underlying shares, the expected volatility of the underlying share price based on peer companies, and the risk-free interest rate. The Company accounts for forfeitures of share-based awards when they occur. Prior to the Company’s IPO of its common stock, the fair values of the shares of common stock underlying the Company’s share-based awards were estimated on each grant date using a probability-weighted expected return method. Following the close of its IPO in June 2016, the fair values of its common stock underlying its share-based awards were estimated using observable market prices.
Risks and Uncertainties	Risks and Uncertainties The Company has experienced losses and negative operating cash flows for many years since inception and has no marketed drug or other products. The Company’s ability to generate future revenue depends upon the results of its development programs, the success of which cannot be guaranteed. The Company will need to raise additional equity or debt capital in the future in order to fund its operations.
Use of Estimates	Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Fair Value of Financial Instruments	Fair Value of Financial Instruments The fair values of the Company’s stockholder notes receivable were approximately $30,000 and $28,000 at March 31, 2017 and December 31, 2016, respectively. The fair value was calculated using an income approach to estimate the present value of expected future cash flows to be received under the notes. The measurement is considered to be based primarily on Level 3 inputs used in the calculation, including the discount rate applied and the estimate of future cash flows.
Net Loss per Share	Net Loss per Share Basic and diluted net loss per common share is calculated by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period, without consideration for common stock equivalents. The Company’s potentially dilutive shares, which include unvested restricted stock and options to purchase common stock, are considered to be common stock equivalents and are only included in the calculation of diluted net income (loss) per share when their effect is dilutive. For periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company uses the two-class method to compute net loss per common share attributable to common stockholders because the Company has issued securities, other than Class A and Class B common stock, that contractually entitle the holders to participate in dividends and earnings of the Company. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings. Holders of restricted common stock are entitled to the dividend amount paid to common stockholders on an as-if-converted-to-common stock basis when declared by the Company’s Board of Directors. As a result, all restricted common stock are considered to be participating securities.
Deferred Offering Costs	Deferred Offering Costs Deferred offering costs, which primarily consist of direct incremental accounting, legal, and printing fees relating to the IPO, were initially capitalized. The deferred offering costs totaling $3,489,000 were subsequently offset against IPO proceeds upon the completion of the IPO on June 1, 2016.
Debt Issuance Costs	Debt Issuance Costs The Company defers costs related to debt issuance and amortizes these cost to interest expense over the term of the debt, using the effective interest method. Debt issuance costs are presented in the balance sheet as a deduction from the carrying amount of the debt liability.
Recent Accounting Pronouncements	Recent Accounting Pronouncements The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has irrevocably elected not to avail itself of this exemption from new or revised accounting standards, and, therefore, will be subject to the same new or revised accounting standards as public companies that are not emerging growth companies. In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers Revenue Recognition The new standard is effective for interim and annual periods beginning after December 15, 2017, with early application for interim and annual periods beginning after December 15, 2016, permitted, and allows two methods of adoption: the full retrospective method, which requires the standard to be applied to each prior period presented, or the modified retrospective method, which requires the cumulative effect of adoption to be recognized as an adjustment to opening retained earnings in the period of adoption. The Company has begun an initial review of its existing contracts with AbbVie and KHK and has not yet determined what, if any, effect ASU 2016-09 will have on its consolidated results of operations or financial position. In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs In February 2016, the FASB issued ASU No. 2016-02, Leases Leases In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments In January 2017, the FASB issued ASU No. 2017-03, Accounting Changes and Error Corrections and Investments—Equity Method and Joint Ventures Revenue from Contracts with Customers Leases Financial Instruments—Credit Losses Measurement of Credit Losses on Financial Instruments

Term Loan (Tables)

Term Loan (Tables)	3 Months Ended
	Mar. 31, 2017
Term Loan A
Schedule of Future Principal Payments for Term A Loan	The future principal payments for the Company’s Term A Loan as of March 31, 2017 are as follows (in thousands): 2017 $ — 2018 975 2019 5,854 2020 5,854 2021 5,854 2022 1,463 $ 20,000

Stock-Based Compensation (Table

Stock-Based Compensation (Tables)	3 Months Ended
	Mar. 31, 2017
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Summary of Stock Based Compensation Expense	The following table summarizes stock-based compensation expense reflected in the consolidated statements of operations (in thousands): Three Months ended March 31, 2017 2016 Research and development $ 570 $ 138 General and administrative 1,033 151 $ 1,603 $ 289
Summary of Stock Option Activity	The following table summarizes stock option activity as of March 31, 2017, and changes during the three months ended March 31, 2017, under the 2007 Long Term Incentive Plan (the 2007 LTIP) and standalone option agreements: Number of Options Weighted- Average Exercise Price Outstanding at January 1, 2017 2,311,146 17.18 Granted 60,169 26.31 Exercised (20,713 ) 11.62 Forfeited (2,225 ) 11.98 Expired — — Outstanding at March 31, 2017 2,348,377 17.46 Exercisable at March 31, 2017 552,887 16.72

Net Loss per Share (Tables)

Net Loss per Share (Tables)	3 Months Ended
	Mar. 31, 2017
Earnings Per Share [Abstract]
Computation of Basic and Diluted Net Loss per Share	The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders: Three Months ended March 31, 2017 2016 Numerator Net loss (in thousands) $ (7,098 ) $ (258 ) Denominator Weighted-average number of common shares used in net loss per share – basic 22,350,436 15,990,766 Dilutive potential common shares — — Weighted-average number of common shares used in net loss per share – diluted 22,350,436 15,990,766 Net loss per share – basic (0.32 ) (0.02 ) Net loss per share – diluted (0.32 ) (0.02 )

Description of Business - Addit

Description of Business - Additional Information (Details) $ / shares in Units, $ in Millions	May 25, 2016USD ($)$ / sharesshares
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Proceeds from issuance of common stock from initial public offering | $	$ 60.9
IPO
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Issuance price (in dollars per share) | $ / shares	$ 11
IPO | Common Stock A
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Issuance of common stock	6,325,000
Over-Allotment Option | Common Stock A
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Issuance of common stock	825,000

Summary of Significant Accoun18

Summary of Significant Accounting Policies - Additional Information (Details) - USD ($)	Jan. 01, 2017	Jun. 30, 2013	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016	Jun. 01, 2016
Significant Accounting Policies [Line Items]
Milestone payment period		2 years
Collaboration revenue			$ 500,000
Stockholder notes receivable			30,000		$ 28,000
Deferred offering costs						$ 3,489,000
Provision for income tax expense (benefit)				$ 18,000
Accounting Standards Update 2015-03 | Term Loan
Significant Accounting Policies [Line Items]
Debt issuance costs			87,000
Debt outstanding			20,000,000
Accounting Standards Update (ASU) No. 2016-09
Significant Accounting Policies [Line Items]
Cumulative effect adjustment to retained earnings	$ 110,000
Provision for income tax expense (benefit)	$ (115,000)
AbbVie Ltd.
Significant Accounting Policies [Line Items]
Research and development costs received			$ 0	$ 0

Term Loan - Additional Informat

Term Loan - Additional Information (Details)	Jul. 01, 2017USD ($)	Mar. 31, 2017USD ($)	Mar. 31, 2017USD ($)TermLoan
Debt Instrument [Line Items]
Proceeds from long-term debt, net of discount			$ 19,840,000
Term Loan A
Debt Instrument [Line Items]
Debt instrument, carrying value		$ 20,000,000	$ 20,000,000
Loan And Security Agreement
Debt Instrument [Line Items]
Number of term loans | TermLoan			2
Debt instrument, prepayment terms			The Company has the option to prepay all, but not less than all, of the borrowed amounts, provided that the Company will be obligated to pay a prepayment fee equal to (a) 3.0% of the outstanding principal balance of the applicable Term Loan if prepayment is made prior to the first anniversary of the applicable funding date of the Term Loan, (b) 2.0% of the outstanding principal balance of the applicable Term Loan if prepayment is made prior to the second anniversary of the applicable funding date of the Term Loan, or (c) 1.0% of the outstanding principal balance of the applicable Term Loan if prepayment is made prior to the third anniversary of the applicable funding date of the Term Loan.
Debt instrument final exit fee payment percentage			2.95%
Loan And Security Agreement | Loan Prepayment Prior To First Anniversary [Member]
Debt Instrument [Line Items]
Debt instrument prepayment fee percentage			3.00%
Loan And Security Agreement | Loan Prepayment Prior To Second Anniversary [Member]
Debt Instrument [Line Items]
Debt instrument prepayment fee percentage			2.00%
Loan And Security Agreement | Loan Prepayment Prior To Third Anniversary [Member]
Debt Instrument [Line Items]
Debt instrument prepayment fee percentage			1.00%
Loan And Security Agreement | Term Loans
Debt Instrument [Line Items]
Maximum borrowing capacity		$ 35,000,000	$ 35,000,000
Debt instrument, payment terms			All outstanding Term Loans will mature on March 1, 2022. Under the Term A Loan, the Company will make interest-only payments for 18 months through November 1, 2018; however, if the Company draws the Term B Loan, the Company will make interest-only payments for 24 months through May 1, 2019. The interest-only payment period will be followed by 41 equal monthly payments, or 35 equal monthly payments if the Company draws the Term B Loan, of principal and interest payments.
Debt instrument, maturity date			Mar. 1, 2022
Debt instrument, interest rate terms			The Term Loans will bear interest at a floating per annum rate calculated as 7.40% plus the greater of the 30-day U.S. Dollar LIBOR rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue or 0.75%, with a minimum rate of 8.15% and maximum rate of 10.15%.
Debt instrument, annual interest rate		7.40%	7.40%
Loan And Security Agreement | Term Loans | Minimum
Debt Instrument [Line Items]
Debt instrument, annual interest rate		8.15%	8.15%
Loan And Security Agreement | Term Loans | Maximum
Debt Instrument [Line Items]
Debt instrument, annual interest rate		10.15%	10.15%
Loan And Security Agreement | Term Loan A
Debt Instrument [Line Items]
Maximum borrowing capacity		$ 20,000,000	$ 20,000,000
Proceeds from long-term debt, net of discount		20,000,000
Debt instrument, interest only payments period			18 months through November 1, 2018
Debt instrument, carrying value		20,000,000	$ 20,000,000
Debt instrument, discount and debt issuance costs		$ 247,000	$ 247,000
Debt instrument, effective interest rate		9.94%	9.94%
Debt instrument, final exit fee accrued		$ 590,000	$ 590,000
Loan And Security Agreement | Term Loan B
Debt Instrument [Line Items]
Maximum borrowing capacity		$ 15,000,000	$ 15,000,000
Debt instrument, interest only payments period			24 months through May 1, 2019
Loan And Security Agreement | Term Loan B | Scenario, Forecast
Debt Instrument [Line Items]
Proceeds from long-term debt, net of discount	$ 15,000,000

Term Loan - Schedule of Future

Term Loan - Schedule of Future Principal Payments for Term A Loan (Details) - Term Loan A $ in Thousands	Mar. 31, 2017USD ($)
Debt Instrument [Line Items]
2,018	$ 975
2,019	5,854
2,020	5,854
2,021	5,854
2,022	1,463
Long-term Debt	$ 20,000

Stock-Based Compensation - Summ

Stock-Based Compensation - Summary of Stock Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation expense	$ 1,603	$ 289
Research and development
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation expense	570	138
General and administrative
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation expense	$ 1,033	$ 151

Stock-Based Compensation - Su22

Stock-Based Compensation - Summary of Stock Option Activity (Details)	3 Months Ended
	Mar. 31, 2017$ / sharesshares
Number of Options, Abstract
Number of Options, Outstanding - Beginning balance | shares	2,311,146
Number of Options, Granted | shares	60,169
Number of Options, Exercised | shares	(20,713)
Number of Options, Forfeited | shares	(2,225)
Number of Options, Outstanding - Ending balance | shares	2,348,377
Number of Options, Exercisable at March 31, 2017 | shares	552,887
Weighted Average Exercise Price, Abstract
Weighted-Average Exercise Price, Outstanding - Beginning balance | $ / shares	$ 17.18
Weighted-Average Exercise Price, Granted | $ / shares	26.31
Weighted-Average Exercise Price, Exercised | $ / shares	11.62
Weighted-Average Exercise Price, Forfeited | $ / shares	11.98
Weighted-Average Exercise Price, Outstanding - Ending balance | $ / shares	17.46
Weighted-Average Exercise Price, Exercisable at March 31, 2017 | $ / shares	$ 16.72

Stock-Based Compensation - Addi

Stock-Based Compensation - Additional Information (Details)	Mar. 31, 2017USD ($)
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Total intrinsic value of outstanding options	$ 13,901,000
Total intrinsic value of exercisable options	$ 4,686,000

Related-Party Transactions - Ad

Related-Party Transactions - Additional Information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Related Party Transaction [Line Items]
Related party transaction, amounts	$ 0
AbbVie Ltd. | Research and development
Related Party Transaction [Line Items]
Payments made to stockholders		$ 115,000
Minimum | AbbVie Ltd.
Related Party Transaction [Line Items]
Stockholders' ownership percentage		10.00%

Net Loss per Share - Computatio

Net Loss per Share - Computation of Basic and Diluted Net Loss per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Numerator
Net loss	$ (7,098)	$ (258)
Denominator
Weighted-average number of common shares used in net loss per share – basic	22,350,436	15,990,766
Weighted-average number of common shares used in net loss per share – diluted	22,350,436	15,990,766
Net loss per share – basic	$ (0.32)	$ (0.02)
Net loss per share – diluted	$ (0.32)	$ (0.02)

Net Loss per Share - Additional

Net Loss per Share - Additional Information (Details) - shares	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Earnings Per Share [Abstract]
Weighted average anti-dilutive shares excludes from computation of earnings per share	2,348,377	2,348,377