Reata Pharmaceuticals (RETA) 10-Q 8 May 18 2018 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2018	May 04, 2018
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2018
Document Fiscal Year Focus	2,018
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	Accelerated Filer
Common Stock A
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		20,185,189
Common Stock B
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		5,979,447

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Assets
Cash and cash equivalents	$ 105,937	$ 129,780
Amounts earned or due from collaboration arrangements	26,321	1,014
Prepaid expenses and other current assets	2,489	2,315
Total current assets	134,747	133,109
Property and equipment, net	829	718
Other assets	1,237	1,510
Total assets	136,813	135,337
Liabilities and stockholders’ deficit
Accounts payable	1,002	2,067
Accrued direct research liabilities	13,830	12,627
Other current liabilities	5,005	3,511
Current portion of term loan	2,693	1,229
Current portion of deferred revenue	28,836	28,183
Total current liabilities	51,366	47,617
Other long-term liabilities	46	53
Term loan, net of current portion and debt issuance costs	16,977	18,385
Deferred revenue, net of current portion	211,125	216,255
Total noncurrent liabilities	228,148	234,693
Commitments and contingencies
Stockholders’ deficit:
Additional paid-in capital	192,962	190,145
Shareholder notes receivable	(2)	(2)
Accumulated deficit	(335,688)	(337,143)
Total stockholders’ deficit	(142,701)	(146,973)
Total liabilities and stockholders’ deficit	136,813	135,337
Common Stock A
Stockholders’ deficit:
Common stock value	20	20
Common Stock B
Stockholders’ deficit:
Common stock value	$ 7	$ 7

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2018	Dec. 31, 2017
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	19,991,082	19,975,340
Common stock, shares outstanding	19,991,082	19,975,340
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	6,171,517	6,166,166
Common stock, shares outstanding	6,171,517	6,166,166

Unaudited Consolidated Statemen

Unaudited Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Collaboration revenue
License and milestone	$ 32,168	$ 12,729
Other revenue	224	3
Total collaboration revenue	32,392	12,732
Expenses
Research and development	21,407	14,603
General and administrative	6,628	5,173
Depreciation and amortization	101	130
Total expenses	28,136	19,906
Other income (expense)
Investment income	335	81
Interest expense	(509)	(5)
Total other income (expense)	(174)	76
Income (loss) before taxes on income	4,082	(7,098)
Net income (loss)	$ 4,082	$ (7,098)
Net income (loss) per share—basic	$ 0.16	$ (0.32)
Net income (loss) per share—diluted	$ 0.15	$ (0.32)
Weighted-average number of common shares used in net income (loss) per share basic	26,155,141	22,350,436
Weighted-average number of common shares used in net income (loss) per share diluted	26,633,521	22,350,436

Unaudited Consolidated Stateme5

Unaudited Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Operating activities
Net income (loss)	$ 4,082	$ (7,098)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	101	130
Amortization of debt issuance costs	59
Stock-based compensation expense	2,485	1,603
Changes in operating assets and liabilities:
Amounts earned or due from collaboration arrangements	(25,307)
Prepaid expenses and other current assets	(174)	(490)
Other assets	273	(769)
Accounts payable	(1,065)	(3,289)
Accrued direct research and other current liabilities	2,636	84
Deferred revenue	(7,111)	(12,229)
Net cash used in operating activities	(24,021)	(22,058)
Investing activities
Purchases of property and equipment	(151)	(34)
Net cash used in investing activities	(151)	(34)
Financing activities
Proceeds from long-term debt		20,000
Payments on deferred issuance costs	(3)	(160)
Exercise of options	332	241
Payment of capital lease obligation		(45)
Net cash provided by financing activities	329	20,036
Net decrease in cash and cash equivalents	(23,843)	(2,056)
Cash and cash equivalents at beginning of year	129,780	84,732
Cash and cash equivalents at end of period	105,937	82,676
Supplemental disclosures
Cash paid for interest	445	5
Purchases of equipment in accounts payable and other current liabilities	$ 74
Unpaid debt issuance costs		$ 87

Description of Business

Description of Business	3 Months Ended
	Mar. 31, 2018
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 focused on identifying, developing, and commercializing therapeutics to address serious and life-threatening diseases with few or no approved therapies by targeting molecular pathways that regulate cellular metabolism and inflammation. The Company is currently conducting three registrational trials with its lead product candidates, bardoxolone methyl and omaveloxolone, which activate the transcription factor Nrf2 to restore mitochondrial function, reduce oxidative stress, and resolve inflammation. The Company’s lead registrational programs are evaluating its product candidates 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), and a rare and severe form of pulmonary arterial hypertension associated with connective tissue disease (CTD-PAH). The Company has received orphan drug designation from the FDA for bardoxolone methyl for the treatment of Alport syndrome and PAH and for omaveloxolone for the treatment of FA. In addition to its three registrational programs, the Company is currently conducting additional clinical and preclinical programs in serious and life-threatening diseases that may provide expansion and additional opportunities for its drug candidates. The Company plans to evaluate data from these earlier stage programs to determine which indications to advance into later stage trials. The Company’s consolidated financial statements include the accounts of all majority-owned subsidiaries. Accordingly, the Company’s share of net earnings and losses from these subsidiaries is included in the consolidated statements of operations. Intercompany profits, transactions, and balances have been eliminated in consolidation.

Summary of Significant Accounti

Summary of Significant Accounting Policies	3 Months Ended
	Mar. 31, 2018
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, 2018, are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. The consolidated balance sheet at December 31, 2017, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the annual consolidated financial statements and footnotes thereto of the Company. The Company’s significant accounting policies are described in Note 2 of Notes to Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended December 31, 2017 (2017 Annual Report on Form 10-K). During the first quarter of 2018, the Company adopted Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers Revenue Recognition The Company’s revenue to date has been generated primarily from licensing fees received under its collaborative licensing agreements with AbbVie Ltd. (AbbVie) and Kyowa Hakko Kirin Co., Ltd. (KHK) and reimbursements for expenses from KHK. The terms of the agreements include non-refundable upfront fees, funding of research and development activities, payments based upon achievement of milestones, and royalties on net product sales. Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the promised goods or services in the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including the constraint on variable consideration; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as the entity satisfies a performance obligation. At contract inception, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when or as the performance obligation is satisfied. Licenses of intellectual property: If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the customer, and the customer can use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Milestone payments: At the inception of each arrangement that includes milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the value of the associated milestone (such as a regulatory submission by the Company) is included in the transaction price, which is then allocated to each performance obligation. Milestone payments that are not within the control of the Company, such as approvals from regulators, are not considered probable of being achieved until those approvals are received. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, collaboration, and other revenues and earnings in the period of adjustment and in future periods through the end of the performance obligation period. Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and where the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (a) when the related sales occur, or (b) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of its licensing arrangements. Manufacturing Supply Services: Arrangements that include a promise for future supply of drug substance or drug product for either clinical development or commercial supply at the customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the licensee and, if so, they are accounted for as separate performance obligations. If the Company is entitled to additional payments when the customer exercises these options, any additional payments are recorded when the customer obtains control of the goods, which is upon delivery. For a complete discussion of accounting for collaborative licensing agreements, see Note 3, Collaboration Agreements 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 Topic 606, which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition Collaboration Agreements In February 2016, the FASB issued ASU No. 2016-02, Leases Leases

Collaboration Agreements

Collaboration Agreements	3 Months Ended
	Mar. 31, 2018
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Collaboration Agreements	3. Collaboration Agreements On January 1, 2018, the Company adopted Topic 606 using the modified retrospective transition method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historical accounting under Topic 605. AbbVie In December 2011, the Company entered into the AbbVie collaboration agreement to jointly research, develop, and commercialize the Company’s portfolio of second and later generation oral Nrf2 activators. The terms of the agreement include payment to the Company of a nonrefundable, up-front payment of $400,000,000 and development cost sharing for jointly developing indications after certain initial early development costs were incurred by the Company. The Company evaluated the AbbVie collaboration agreement under Topic 606 and determined that the upfront payment constituted the transaction price. The Company identified three performance obligations at contract inception: (1) the exclusive license rights to research, develop, and commercialize Nrf2 activators outside the United States, (2) the obligation to participate in Joint Steering Committees (JSCs), and (3) cost sharing for jointly developed indications. The transaction price was allocated to the exclusive license rights and the obligation to participate on JSCs, which are accounted for as a single performance obligation, and is being recognized as revenue ratably through December 2026, which is the estimated minimum period that is needed to complete the deliverables under the terms of the AbbVie Collaboration Agreement. The Company records shared development cost payments from AbbVie as reductions of research and development expense. As the Company is currently unilaterally developing its lead Nrf2 activator omaveloxolone, no amounts were recognized during the three months ended March 31, 2018. The adoption of Topic 606 did not result in a significant change in revenue recognition for this agreement. As of January 1, 2018, the Company’s deferred revenue balance was $238,291,000, which represents the contract liability for the unsatisfied performance obligations as well as the variable consideration paid in advance that is being recognized ratably through December 2026. The Company began recognizing revenue related to the up-front payment upon execution of the agreement and, accordingly, recognized approximately $6,570,000 as collaboration revenue during the three months ended March 31, 2018. As of March 31, 2018, the Company has a remaining deferred revenue balance totaling approximately $231,721,000. KHK In December 2009, the Company entered into the KHK agreement, which granted KHK an exclusive license to develop and commercialize bardoxolone methyl in the licensed territory. The Company received a nonrefundable, up-front license fee of $35,000,000 and regulatory milestones of $15,000,000 and could receive additional regulatory milestones of $82,000,000 and commercial milestones of $140,000,000, as well as tiered royalties ranging from the low teens to the low 20 percent range, depending on the country of sale and the amount of annual net sales, on net sales by KHK in the licensed territory. The Company evaluated the KHK agreement under Topic 606 and identified three performance obligations at contract inception: (1) the exclusive license rights to develop and commercialize bardoxolone methyl in Japan and licensed territory, (2) the obligation to participate in JSCs, and (3) the obligation to supply bardoxolone methyl for KHK’s clinical trial and commercial needs. The transaction price was allocated to the exclusive license rights and the obligation to participate on JSCs, which are accounted for as a single performance obligation and is recognized as revenue ratably through December 2021, which is the estimated minimum period to complete the performance obligation under the KHK agreement. Any consideration related to the Company’s obligation to supply KHK with drug product is recognized upon delivery. Upon adoption of Topic 606, the Company determined that the transaction price for this agreement at contract inception includes the upfront fee of $35,000,000 and regulatory milestones of $15,000,000 received. The Company evaluated the remaining potential milestones and determined that a future regulatory milestone of $30,000,000 is probable of being achieved in 2018 due to certain notifications and events during the period ending March 31, 2018. This future milestone relates to the development of KHK’s clinical program of bardoxolone methyl. The Company believes the remaining additional regulatory milestones of $52,000,000 and commercial milestones of $140,000,000 are fully constrained as they are not within the control of the Company or KHK and did not include these remaining milestones in the transaction price. Any consideration related to royalties will be recognized when the related sales occur. At the end of January 2018, the Company added the future milestone of $30,000,000 as variable consideration to the transaction price and recorded $24,843,000 in a contract asset, which is included as amounts earned or due from collaboration arrangements, on the balance sheet, and in collaboration revenue as a cumulative catch-up for the portion of this milestone that was satisfied in prior periods. The remainder of $5,157,000 will be recognized as performance obligations are satisfied over the remaining performance obligation period. During the three months ended March 31, 2018, the Company recorded an additional $213,000 in revenue for the portion of this milestone that was satisfied in the period, resulting in a contract asset balance of $25,057,000 as of March 31, 2018. This increase in revenue resulted in increases of $25,057,000 in net income and $0.96 in basic net income per share for the three months ended March 31, 2018. As of January 1, 2018, the Company’s deferred revenue balance was $8,781,000, which represents the contract liability for the unsatisfied performance obligations as well as the variable consideration paid in advance that is being recognized ratably through December 2021. The Company began recognizing revenue related to the up-front payment and milestones included in the transaction price upon execution of the agreement and, accordingly, recognized approximately $541,000 as collaboration revenue during the three months ended March 31, 2018, resulting in a remaining deferred revenue balance of $8,240,000 as of March 31, 2018.

Term Loan

Term Loan	3 Months Ended
	Mar. 31, 2018
Debt Disclosure [Abstract]
Term Loan	4. 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, the 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. On November 3, 2017, the Company amended the Loan Agreement (Amended Loan Agreement) to increase the Term B Loan amount to either $20,000,000 or $25,000,000, which extends the interest only period from six to twelve months if the Term B Loan is drawn. The Company may, at its sole discretion, borrow $20,000,000 under Term B Loan by June 29, 2018. The Company may borrow an additional $5,000,000 under the Term B Loan, for a total of $25,000,000, upon the achievement of one of two milestones by the earlier of 90 days after the achievement of a milestone or June 29, 2018. The Company paid an amendment fee of $250,000 on November 8, 2017, upon the execution of the Amended Loan Agreement. If the Company does not draw the Term B Loan by June 29, 2018, the Company would pay an unused line fee of $1,000,000. 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 October 1, 2018; however, if the Company draws the Term B Loan, the Company will make interest-only payments for 30 months through October 1, 2019. The interest-only payment period will be followed by 41 equal monthly payments, or 29 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 by 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 after the second 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, 2018, 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 $527,000. 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 9.6% before debt issuance costs and final exit fee and 11.3% including debt issuance costs and final exit fee. The Company is in compliance with all covenants under the Loan Agreement as of March 31, 2018. The future principal payments for the Company’s Term A Loan as of March 31, 2018 are as follows (in thousands): 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, 2018
Income Tax Disclosure [Abstract]
Income Taxes	5. Income Taxes The Tax Cuts and Jobs Act of 2017 (the 2017 Tax Act), which was signed into law on December 22, 2017, resulted in significant changes to the U.S. corporate income tax system. These changes include a federal statutory rate reduction from 35% to 21% and the elimination or reduction in the deductibility of certain credits and limitations, such as tax credits related to designated orphan drugs, net operating losses, interest expense, and executive compensation. The federal statutory rate reduction took effect on January 1, 2018. 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, 2018, 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. On December 22, 2017, Staff Accounting Bulletin No. 118 (SAB 118) was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act. In accordance with SAB 118, the Company continues to evaluate the impact of the 2017 Tax Act, which may impact its current conclusions. Any subsequent adjustment to those amounts will be recorded to current tax expense in the third quarter of 2018 when the analysis is expected to be complete.

Stock-Based Compensation

Stock-Based Compensation	3 Months Ended
	Mar. 31, 2018
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Stock-Based Compensation	6. 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, 2018 2017 Research and development $ 961 $ 570 General and administrative 1,524 1,033 $ 2,485 $ 1,603 The following table summarizes stock option activity as of March 31, 2018, and changes during the three months ended March 31, 2018, 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, 2018 3,251,696 19.83 Granted 49,250 28.82 Exercised (21,093 ) 15.74 Forfeited (14,713 ) 23.43 Expired — — Outstanding at March 31, 2018 3,265,140 19.98 Exercisable at March 31, 2018 1,114,320 17.61 The total intrinsic value of all outstanding options and exercisable options at March 31, 2018 was $10,235,000 and $5,852,000, respectively.

Net Income (Loss) per Share

Net Income (Loss) per Share	3 Months Ended
	Mar. 31, 2018
Earnings Per Share [Abstract]
Net Income (Loss) per Share	7. Net Income (Loss) per Share The following table sets forth the computation of basic and diluted net income (loss) per share attributable to common stockholders: Three Months ended March 31, 2018 2017 Numerator Net income (loss) (in thousands) $ 4,082 $ (7,098 ) Denominator Weighted-average number of common shares used in net income (loss) per share – basic 26,155,141 22,350,436 Dilutive potential common shares 478,380 — Weighted-average number of common shares used in net income (loss) per share – diluted 26,633,521 22,350,436 Net income (loss) per share – basic $ 0.16 $ (0.32 ) Net income (loss) per share – diluted $ 0.15 $ (0.32 ) 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 2,131,219 and 2,348,377 shares for the three months ended March 31, 2018 and 2017, respectively.

Summary of Significant Accoun13

Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2018
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, 2018, are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. The consolidated balance sheet at December 31, 2017, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the annual consolidated financial statements and footnotes thereto of the Company. The Company’s significant accounting policies are described in Note 2 of Notes to Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended December 31, 2017 (2017 Annual Report on Form 10-K). During the first quarter of 2018, the Company adopted Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers
Revenue Recognition	Revenue Recognition The Company’s revenue to date has been generated primarily from licensing fees received under its collaborative licensing agreements with AbbVie Ltd. (AbbVie) and Kyowa Hakko Kirin Co., Ltd. (KHK) and reimbursements for expenses from KHK. The terms of the agreements include non-refundable upfront fees, funding of research and development activities, payments based upon achievement of milestones, and royalties on net product sales. Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the promised goods or services in the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including the constraint on variable consideration; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as the entity satisfies a performance obligation. At contract inception, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when or as the performance obligation is satisfied. Licenses of intellectual property: If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the customer, and the customer can use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Milestone payments: At the inception of each arrangement that includes milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the value of the associated milestone (such as a regulatory submission by the Company) is included in the transaction price, which is then allocated to each performance obligation. Milestone payments that are not within the control of the Company, such as approvals from regulators, are not considered probable of being achieved until those approvals are received. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, collaboration, and other revenues and earnings in the period of adjustment and in future periods through the end of the performance obligation period. Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and where the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (a) when the related sales occur, or (b) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of its licensing arrangements. Manufacturing Supply Services: Arrangements that include a promise for future supply of drug substance or drug product for either clinical development or commercial supply at the customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the licensee and, if so, they are accounted for as separate performance obligations. If the Company is entitled to additional payments when the customer exercises these options, any additional payments are recorded when the customer obtains control of the goods, which is upon delivery. For a complete discussion of accounting for collaborative licensing agreements, see Note 3, Collaboration Agreements
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 Topic 606, which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition Collaboration Agreements In February 2016, the FASB issued ASU No. 2016-02, Leases Leases

Term Loan (Tables)

Term Loan (Tables)	3 Months Ended
	Mar. 31, 2018
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, 2018 are as follows (in thousands): 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, 2018
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, 2018 2017 Research and development $ 961 $ 570 General and administrative 1,524 1,033 $ 2,485 $ 1,603
Summary of Stock Option Activity	The following table summarizes stock option activity as of March 31, 2018, and changes during the three months ended March 31, 2018, 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, 2018 3,251,696 19.83 Granted 49,250 28.82 Exercised (21,093 ) 15.74 Forfeited (14,713 ) 23.43 Expired — — Outstanding at March 31, 2018 3,265,140 19.98 Exercisable at March 31, 2018 1,114,320 17.61

Net Income (Loss) per Share (Ta

Net Income (Loss) per Share (Tables)	3 Months Ended
	Mar. 31, 2018
Earnings Per Share [Abstract]
Computation of Basic and Diluted Net Income (Loss) per Share	The following table sets forth the computation of basic and diluted net income (loss) per share attributable to common stockholders: Three Months ended March 31, 2018 2017 Numerator Net income (loss) (in thousands) $ 4,082 $ (7,098 ) Denominator Weighted-average number of common shares used in net income (loss) per share – basic 26,155,141 22,350,436 Dilutive potential common shares 478,380 — Weighted-average number of common shares used in net income (loss) per share – diluted 26,633,521 22,350,436 Net income (loss) per share – basic $ 0.16 $ (0.32 ) Net income (loss) per share – diluted $ 0.15 $ (0.32 )

Summary of Significant Accoun17

Summary of Significant Accounting Policies - Additional Information (Details) - USD ($)	Mar. 31, 2018	Jan. 01, 2018	Dec. 31, 2017
Revenue Initial Application Period Cumulative Effect Transition [Line Items]
Accumulated deficit	$ (335,688,000)		$ (337,143,000)
Adjustment to remainder of transaction price related to milestone achievement			$ 15,000,000
Topic 606 | Difference between Revenue Guidance in Effect before and after Topic 606
Revenue Initial Application Period Cumulative Effect Transition [Line Items]
Accumulated deficit		$ (2,634,000)
Deferred revenue		$ 2,634,000

Collaboration Agreements - Addi

Collaboration Agreements - Additional Information (Details)	1 Months Ended			3 Months Ended
	Jan. 31, 2018USD ($)	Dec. 31, 2011USD ($)	Dec. 31, 2009USD ($)	Mar. 31, 2018USD ($)PerformanceObligation$ / shares	Jan. 01, 2018USD ($)
AbbVie | License Agreement Terms
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Collaboration revenue recognized				$ 0
AbbVie | Collaborative Arrangement | Up-front Payment Arrangement
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Up-front collaboration payment received		$ 400,000,000
Number of performance obligations | PerformanceObligation				3
Collaboration revenue recognized				$ 6,570,000
Deferred revenue				$ 231,721,000	$ 238,291,000
Deferred revenue, expected timing of recognition				2026-12
KHK Agreement | License Agreement Terms
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Number of performance obligations | PerformanceObligation				3
Collaboration revenue recognized				$ 541,000
Deferred revenue				$ 8,240,000	$ 8,781,000
Deferred revenue, expected timing of recognition				2021-12
KHK Agreement | Up-front Payment Arrangement | License Agreement Terms
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Upfront license fee received			$ 35,000,000
KHK Agreement | Up-front Payment Arrangement | License Agreement Terms | Topic 606
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Upfront license fee received			35,000,000
KHK Agreement | Regulatory Development Milestone | License Agreement Terms
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Collaboration revenue, milestone payments received			15,000,000
Collaboration revenue, potential milestone payments			82,000,000
Future milestones to be received based upon achievement of certain notifications, included in transaction price	$ 30,000,000
Contract asset				$ 25,057,000
Cumulative catch-up adjustment to collaboration revenue	24,843,000
Remainder of transaction price to be recognized as performance obligation	5,157,000
Collaboration revenue recognized for portion of milestone that was satisfied				213,000
Increase in net income due to increase in collaboration revenue				$ 25,057,000
Increase in basic net income per share due to increase in collaboration revenue | $ / shares				$ 0.96
KHK Agreement | Regulatory Development Milestone | License Agreement Terms | Amounts Earned or Due from Collaboration Arrangements
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Contract asset	$ 24,843,000
KHK Agreement | Regulatory Development Milestone | License Agreement Terms | Topic 606
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Collaboration revenue, milestone payments received			15,000,000
Future milestones to be received based upon achievement of certain notifications, included in transaction price				$ 30,000,000
Collaboration agreements, additional remaining potential milestones not included in transaction price				52,000,000
KHK Agreement | Commercial Milestones | License Agreement Terms
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Collaboration revenue, potential milestone payments			$ 140,000,000
KHK Agreement | Commercial Milestones | License Agreement Terms | Topic 606
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Collaboration agreements, additional remaining potential milestones not included in transaction price				$ 140,000,000

Term Loan - Additional Informat

Term Loan - Additional Information (Details)	Nov. 09, 2017USD ($)	Nov. 08, 2017USD ($)	Nov. 03, 2017USD ($)	Mar. 31, 2017USD ($)	Mar. 31, 2018USD ($)	Mar. 31, 2017USD ($)TermLoan
Debt Instrument [Line Items]
Proceeds from long-term debt						$ 20,000,000
Term Loan A
Debt Instrument [Line Items]
Debt instrument, carrying value					$ 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 by 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 after the second 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 By Second Anniversary [Member]
Debt Instrument [Line Items]
Debt instrument prepayment fee percentage					2.00%
Loan And Security Agreement | Loan Prepayment After Second 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 October 1, 2018; however, if the Company draws the Term B Loan, the Company will make interest-only payments for 30 months through October 1, 2019. The interest-only payment period will be followed by 41 equal monthly payments, or 29 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%
Debt instrument, basis spread on variable rate					0.75%
Loan And Security Agreement | Term Loans | Minimum
Debt Instrument [Line Items]
Debt instrument, annual interest rate					8.15%
Loan And Security Agreement | Term Loans | Maximum
Debt Instrument [Line Items]
Debt instrument, annual interest rate					10.15%
Loan And Security Agreement | Term Loan A
Debt Instrument [Line Items]
Maximum borrowing capacity			$ 20,000,000
Proceeds from long-term debt				20,000,000
Debt instrument, interest only payments period					18 months through October 1, 2018
Debt instrument, carrying value					$ 20,000,000
Debt instrument, debt issuance costs					$ 527,000
Debt instrument, effective interest rate before debt issuance costs and final exit fee					9.60%
Debt instrument, effective interest rate including debt issuance costs and final exit fee					11.30%
Debt instrument, final exit fee accrued					$ 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					30 months through October 1, 2019
Amended Loan Agreement | Term Loan B
Debt Instrument [Line Items]
Debt instrument, interest only period			6 months
Period to borrow funds after achievement of milestone	90 days
Debt instrument, possible borrowing date	Jun. 29, 2018
Payment of amendment fee		$ 250,000
Payment of unused line fee	$ 1,000,000
Amended Loan Agreement | Term Loan B | Sole Discretion
Debt Instrument [Line Items]
Maximum borrowing capacity			$ 20,000,000
Amended Loan Agreement | Term Loan B | Achievement of One of Two Milestones
Debt Instrument [Line Items]
Maximum borrowing capacity			25,000,000
Amended Loan Agreement | Term Loan B | Scenario Two
Debt Instrument [Line Items]
Additional borrowing capacity			$ 5,000,000
Amended Loan Agreement | Term Loan B | If Term B Loan is Drawn
Debt Instrument [Line Items]
Debt instrument, interest only period			12 months

Term Loan - Schedule of Future

Term Loan - Schedule of Future Principal Payments for Term A Loan (Details) - Term Loan A $ in Thousands	Mar. 31, 2018USD ($)
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

Income Taxes - Additional Infor

Income Taxes - Additional Information (Details)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Income Tax Disclosure [Line Items]
Federal statutory tax rate		35.00%
Scenario Forecast
Income Tax Disclosure [Line Items]
Federal statutory tax rate	21.00%

Stock-Based Compensation - Summ

Stock-Based Compensation - Summary of Stock Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation expense	$ 2,485	$ 1,603
Research and development
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation expense	961	570
General and administrative
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation expense	$ 1,524	$ 1,033

Stock-Based Compensation - Su23

Stock-Based Compensation - Summary of Stock Option Activity (Details)	3 Months Ended
	Mar. 31, 2018$ / sharesshares
Number of Options, Abstract
Number of Options, Outstanding - Beginning balance | shares	3,251,696
Number of Options, Granted | shares	49,250
Number of Options, Exercised | shares	(21,093)
Number of Options, Forfeited | shares	(14,713)
Number of Options, Outstanding - Ending balance | shares	3,265,140
Number of Options, Exercisable | shares	1,114,320
Weighted Average Exercise Price, Abstract
Weighted-Average Exercise Price, Outstanding - Beginning balance | $ / shares	$ 19.83
Weighted-Average Exercise Price, Granted | $ / shares	28.82
Weighted-Average Exercise Price, Exercised | $ / shares	15.74
Weighted-Average Exercise Price, Forfeited | $ / shares	23.43
Weighted-Average Exercise Price, Outstanding - Ending balance | $ / shares	19.98
Weighted-Average Exercise Price, Exercisable | $ / shares	$ 17.61

Stock-Based Compensation - Addi

Stock-Based Compensation - Additional Information (Details)	Mar. 31, 2018USD ($)
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Total intrinsic value of outstanding options	$ 10,235,000
Total intrinsic value of exercisable options	$ 5,852,000

Net Income (Loss) per Share - C

Net Income (Loss) per Share - Computation of Basic and Diluted Net Income (Loss) per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Numerator
Net income (loss)	$ 4,082	$ (7,098)
Denominator
Weighted-average number of common shares used in net income (loss) per share basic	26,155,141	22,350,436
Dilutive potential common shares	478,380
Weighted-average number of common shares used in net income (loss) per share diluted	26,633,521	22,350,436
Net income (loss) per share—basic	$ 0.16	$ (0.32)
Net income (loss) per share—diluted	$ 0.15	$ (0.32)

Net Income (Loss) per Share - A

Net Income (Loss) per Share - Additional Information (Details) - shares	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Earnings Per Share [Abstract]
Weighted average anti-dilutive shares excludes from computation of earnings per share	2,131,219	2,348,377