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

Insight

We are a clinical-stage biopharmaceutical company focused on identifying,
developing, and commercializing innovative therapies that change patients' lives
for the better. We concentrate on small-molecule therapeutics with novel
mechanisms of action for the treatment of severe, life-threatening diseases with
few or no approved therapies. Our lead programs are omaveloxolone in FA and
bardoxolone in rare forms of CKD. Both of our lead product candidates activate
the transcription factor Nrf2 to normalize mitochondrial function, restore redox
balance, and resolve inflammation. Because mitochondrial dysfunction, oxidative
stress, and inflammation are features of many diseases, we believe
omaveloxolone, bardoxolone, and our next-generation Nrf2 activators have many
potential clinical applications. We possess exclusive, worldwide rights to
develop, manufacture, and commercialize omaveloxolone, bardoxolone, and our
next-generation Nrf2 activators, excluding certain Asian markets for bardoxolone
in certain indications, which are licensed to Kyowa Kirin. In addition, we are
developing RTA 901, the lead product candidate from our Hsp90 modulator program,
in neurological indications. We are the exclusive licensee of RTA 901 and have
worldwide commercial rights.

Recent key developments

Omaveloxolone for Friedreich’s Ataxia

The FDA has granted Fast Track Designation, Orphan Drug Designation, and Rare
Pediatric Disease Designation to omaveloxolone for the treatment of FA. In March
2022, we completed rolling submission of an NDA to the FDA for omaveloxolone for
the treatment of patients with FA. This NDA is supported by the efficacy and
safety data from the MOXIe Part 2 trial and additional supporting data from the
MOXIe Part 1 and MOXIe Extension trials.

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

RTA 901 for neurological indications including diabetic peripheral neuropathic pain

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

Bardoxolone in patients with CKD caused by Alport syndrome

We received a Complete Response Letter (CRL) from the FDA in February 2022 with
respect to its review of our NDA for bardoxolone in the treatment of patients
with CKD caused by Alport syndrome. The CRL indicated the FDA cannot approve the
NDA in its present form. We will continue to work with the FDA to confirm our
next steps on our Alport syndrome program.

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In October 2021, we submitted an MAA to the EMA for bardoxolone in the treatment
of patients with CKD caused by Alport syndrome. In the first quarter of 2022, we
received the 120-day list of questions from the EMA. We are in the process of
preparing our responses. We requested a 90-day extension for our responses which
was granted by the EMA. The timeline for the EMA's review cycle was therefore
extended.

Bardoxolone in patients with autosomal dominant polycystic kidney disease (ADPKD)

We are currently enrolling patients in FALCON, a Phase 3, international,
multi-center, randomized, double-blind, placebo-controlled trial studying the
safety and efficacy of bardoxolone in patients with ADPKD, randomized one-to-one
to active drug or placebo. FALCON is enrolling patients in a broad range of ages
with an estimated glomerular filtration rate (eGFR) between 30 and 90
mL/min/1.73 m2. More than 550 patients are currently enrolled in the trial.

In the first quarter of 2022, we submitted a protocol amendment to the FALCON
Phase 3 trial of bardoxolone in patients with ADPKD with the FDA and other
relevant health authorities. As agreed with the FDA prior to submission of the
amendment, we recently had a Type A meeting to discuss key changes made to the
FALCON protocol. Based on the discussion during the meeting and the meeting
minutes, the Division stated that the proposed primary endpoint of eGFR change
from baseline at Week 108 (8 weeks after planned drug discontinuation at Week
100) was reasonable since the available data suggest that bardoxolone's acute
pharmacodynamic effect on eGFR should be largely resolved. The Division provided
guidance on handling of data from patients who completed Year 2 of the study
before the protocol amendment and so did not have an eGFR assessment at Week
108. This included direction on imputing missing data for these patients in the
primary analysis. The Division stated that, in addition to the primary endpoint,
it will be important to demonstrate that the treatment effect accrues over time
to support a claim that bardoxolone slows the loss of kidney function in
patients with ADPKD and provided guidance on the statistical methodologies for
the exploratory eGFR slope analyses. The FDA also confirmed that if FALCON is
positive, it could support registration of bardoxolone in ADPKD.

Update on operations adjustments due to COVID-19

When COVID-19 emerged as a global pandemic in the first quarter of 2020, Reata
was quick to respond and was an early adopter of a work-from-home policy, with
the exception of the laboratory that continued to operate throughout under
strict safety protocols. For all remote employees, we provided appropriate
workstation equipment as well as training and resources to support employees'
mental and emotional wellbeing. In the second quarter of 2021, Reata relaxed its
policy and permitted employees to return to the office as required. Although the
Omicron variant temporarily caused us to again restrict office attendance, in
February 2022 we permitted modified work schedules to meet business and personal
needs.

Background: Our Programs

The following table presents each of our programs by indication and phase of development:

[[Image Removed: img70967532_0.jpg]]

1Continuing NDA submission completed in March 2022.

2DPNP: Diabetic peripheral neuropathic pain.

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

4AYAME trial conducted in Japan by our strategic collaborator in CKD, Kyowa Kirin. Kyowa Kirin expects the patient’s last visit in the second half of 2022.

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

Neurological disease programs

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

We are also developing RTA 901 for the treatment of neurological diseases. RTA
901 is a highly potent and selective C-terminal modulator of Hsp90, which has a
critical role in mitochondrial function, protein folding, and inflammation. RTA
901 has demonstrated profound efficacy in a wide range of animal models of
neurological disease, including diabetic neuropathy, neuroinflammation, and
neuropathic pain. We plan to initiate a randomized, placebo-controlled Phase 2
trial in DPNP in the fourth quarter of 2022.

Omaveloxolone in patients with Friedreich’s ataxia

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

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

MOXIe Part 2 Trial Results

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

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

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                     [[Image Removed: img70967532_1.jpg]]

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

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

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

MOXIe Expansion Test

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

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Deferred start scan results from August 2021 Data cut

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

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

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

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

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

Delayed start

                                        Week 48 (?1)                Week 

Ex. 72 (?2)

    Difference (LS Mean ± SE)           -2.25 ± 1.07                  

-3.51 ± 1.45

                                          p=0.037                        

p=0.016

    Estimate = ?2 - 0.5 × ?1                     -2.39 ± 1.38
     Upper Limit of 1-sided                         -0.615

90% CI for estimate

1Non-inferiority test performed using MMRM analysis with Toeplitz covariance

                                      structure.




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


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           Change from Baseline in mFARS (Patients without Pes Cavus)
                     [[Image Removed: img70967532_2.jpg]]


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

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

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

No new safety signals were identified in the MOXIe Extension trial.

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Regulatory interactions

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

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

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

Omaveloxolone in other neurological indications

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

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

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

RTA 901 in neurological diseases

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

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

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

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

Chronic Kidney Disease Programs

We and Kyowa Kirin, our strategic collaborator in CKD in Japan, are developing
bardoxolone for the treatment of CKD in multiple indications, including CKD
caused by Alport syndrome, ADPKD, and type 1 and 2 diabetic CKD. CKD is
characterized by a progressive worsening in the rate at which the kidney filters
waste products from the blood, called the glomerular filtration rate (GFR). eGFR
is an estimate of GFR that nephrologists use to track the decline in kidney
function and progression of CKD. When GFR gets too low, patients develop
end-stage kidney disease (ESKD) and require dialysis or a kidney transplant to
survive.

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

Bardoxolone in patients with CKD caused by Alport syndrome

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

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

On November 9, 2020, we reported interim results from the long-term extension
EAGLE trial. EAGLE is an international, multi-center, open-label, extended
access trial evaluating the longer-term safety and tolerability of bardoxolone
in patients with CKD caused by Alport syndrome who participated in the CARDINAL
trial or patients with ADPKD who participated in the FALCON trial. The change
from baseline in eGFR was assessed for the 14 patients with Alport syndrome who
were treated with bardoxolone for three years (two years in CARDINAL and one
year in EAGLE), with four-week off-treatment periods occurring at Weeks 48 and
100. Bardoxolone treatment resulted in a mean on-treatment increase from
baseline in eGFR of 11.5 mL/min/1.73 m2 at Year 1, 13.3 mL/min/1.73 m2 at Year
2, and 11.0 mL/min/1.73 m2 at Year 3.

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

A subset of patients with Alport syndrome (n=18) completed 96 weeks of treatment
in EAGLE, which amounts to approximately four years of total treatment, and had
a mean ± standard error change in eGFR from CARDINAL baseline of 5.5 ± 3.5
mL/min/1.73 m2. This sustained improvement of kidney function is notable when
compared to the CARDINAL trial population's expected yearly eGFR decline of 5.1
mL/min/1.73 m2, which was calculated based on five-year historical eGFR data
collected before patients entered the trial. No new safety findings have been
identified in the EAGLE trial.

On February 25, 2022, we received a CRL from the FDA with respect to its review
of our NDA for bardoxolone in the treatment of patients with CKD caused by
Alport syndrome. The CRL indicated that the FDA cannot approve the NDA in its
present form. Based on its review, the FDA concluded that it does not believe
the submitted data demonstrates that bardoxolone is effective in slowing the
loss of kidney function in patients with Alport syndrome and reducing the risk
of progression to kidney failure and has requested additional data to support
the efficacy and safety of bardoxolone. Their conclusion was based on efficacy
and safety concerns primarily set forth in the FDA's briefing book and discussed
at the Cardiovascular and Renal Drugs Advisory Committee meeting held on
December 8, 2021.

The FDA stated that the issues could be resolved by providing evidence of
effectiveness that includes evidence from an adequate and well-controlled study
showing a clinically relevant effect on the rate of loss of kidney function in
patients with Alport syndrome or, alternatively, an effect on a clinical outcome
(i.e., an endpoint that captures how patients with Alport syndrome feel,
function, or survive). In addition, the FDA stated that we would need to address
whether bardoxolone has a clinically relevant effect on the QT interval and show
that the demonstrated clinical benefits of bardoxolone outweigh its risks. The
FDA welcomed continued discussion on the details of a path forward. We plan to
work closely with the FDA to achieve our goal of bringing this important
medicine to patients in the United States.

In October 2021, we submitted an MAA to the EMA for bardoxolone in the treatment
of patients with CKD caused by Alport syndrome. In the first quarter of 2022, we
received the 120-day list of questions from the EMA. We are in the process of
preparing our responses. We requested a 90-day extension for our responses which
was granted by the EMA. The timeline for the EMA's review cycle was therefore
extended.

Bardoxolone in patients with autosomal dominant polycystic kidney disease

ADPKD is a rare and serious hereditary form of CKD caused by a genetic defect in
PKD1 or PKD2 genes leading to the formation of fluid-filled cysts in the kidneys
and other organs. Cyst growth can cause the kidneys to expand up to five to
seven times their normal volume, leading to pain and progressive loss of kidney
function. Inflammation appears to play a role in cyst growth and is associated
with disease progression in ADPKD.

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

We are currently enrolling patients in FALCON, an international, multi-center,
randomized, double-blind, placebo-controlled trial studying the safety and
efficacy of bardoxolone in patients with ADPKD randomized one-to-one to active
drug or placebo. FALCON is enrolling patients in a broad range of ages, with an
eGFR between 30 and 90 mL/min/1.73 m2.

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In the first quarter of 2022, we finalized a protocol amendment to FALCON, and
we initiated submission of the amendment to the FDA and other relevant health
authorities. The major protocol amendment changes include an increase in the
sample size from 550 to 850 patients, addition of adolescent (12 to 17 years)
patients with ADPKD for a total age range of 12 to 70 years, removal of the
off-treatment period (Week 48 - Week 52) during Year 1, change of the primary
endpoint of off-treatment eGFR change from baseline at Week 52 (or four weeks
after drug discontinuation in Year 1) to eGFR change from baseline at Week 108
(eight weeks after planned drug discontinuation at Week 100). The protocol
amendment also includes addition of an exploratory endpoint of eGFR change from
baseline at Week 112 (12 weeks after planned drug discontinuation at Week 100),
and addition of a sub study with ambulatory blood pressure monitoring.

As agreed with the FDA prior to submission of the amendment, we recently had a
Type A meeting to discuss key changes made to the FALCON protocol. Based on the
discussion during the meeting and the meeting minutes, the Division stated that
the proposed primary endpoint of eGFR change from baseline at Week 108 (8 weeks
after planned drug discontinuation at Week 100) was reasonable since the
available data suggest that bardoxolone's acute pharmacodynamic effect on eGFR
should be largely resolved. The Division provided guidance on handling of data
from patients who completed Year 2 of the study before the protocol amendment
and so did not have an eGFR assessment at Week 108. This included direction on
imputing missing data for these patients in the primary analysis. The Division
stated that, in addition to the primary endpoint, it will be important to
demonstrate that the treatment effect accrues over time to support a claim that
bardoxolone slows the loss of kidney function in patients with ADPKD and
provided guidance on the statistical methodologies for the exploratory eGFR
slope analyses. The FDA also confirmed that if FALCON is positive, it could
support registration of bardoxolone in ADPKD.

Pursuant to the protocol amendment, patients will be treated with bardoxolone or
placebo for 100 weeks followed by a twelve-week withdrawal period. The trial
will remain blinded until study completion. All patients will be asked to return
at Week 108 independent of the time of study drug discontinuation. The secondary
endpoint is the eGFR change from baseline at Week 100. More than 550 patients
are currently enrolled in the trial.

AYAME trial in diabetic CKD conducted by Kyowa Kirin

Upon completion of Kyowa Kirin's Phase 2 TSUBAKI trial of bardoxolone in
patients with Stage 3 and 4 diabetic CKD in Japan, and after discussions with
the Pharmaceuticals and Medical Devices Agency, Kyowa Kirin initiated a Phase 3
outcomes trial called AYAME in patients with Stage 3 or 4 diabetic CKD in Japan.
The primary endpoint is time to onset of a ? 30% decrease in eGFR from baseline
or ESKD. The secondary endpoints are time to onset of a ? 40% decrease in eGFR
from baseline or ESKD, time to onset of a ? 53% decrease in eGFR from baseline
or ESKD, time to onset of ESKD, and change in eGFR from baseline at each
evaluation time point. Kyowa Kirin completed patient enrollment in AYAME in June
2019 and expects the last patient visit to occur in the second half of 2022.

WE Commercial preparation

With the NDA submission of omaveloxolone complete, we are advancing commercial
launch preparations in the United States. We are in the process of building the
commercial infrastructure necessary to effectively support the commercialization
of omaveloxolone for the treatment of FA, if and when we receive regulatory
approval. Commercial launch preparation for omaveloxolone in FA will continue to
advance in step with the regulatory progress.

Our ability to launch omaveloxolone is dependent on the successful filing and
defense of an NDA and approval by the FDA. We have hired commercial leadership
and intend to build the teams, infrastructure, systems, and processes necessary
for the launch of omaveloxolone. This will include sales, marketing, market
access, patient support, and distribution. Additionally, we are expanding
quality and compliance functions to support commercialization. A trade name for
omaveloxolone has been selected.

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

Ex-WE Commercial preparation

Our ability to launch omaveloxolone is dependent on the successful filing and
defense of an MAA and approval by EMA or other regulatory agencies. Outside of
the United States, where appropriate and depending on the terms of our
contractual arrangements, we plan, either alone, or with new collaboration
partners, to commercialize our products. Our strategic collaborator Kyowa Kirin
has all rights to commercialize bardoxolone in its territories. We are refining
our strategy and market assessments with respect to potential launches in the
EU, and we continue to evaluate market opportunities for our products in other
global markets. Commercial launch preparation for omaveloxolone in FA outside of
the United States will advance in step with the regulatory progress.

Company overview

To date, we have focused most of our efforts and resources on developing our
product candidates and conducting preclinical studies and clinical trials. We
have historically financed our operations primarily through revenue generated
from our collaborations with AbbVie and Kyowa Kirin, from sales of our
securities, secured loans, and a strategic financing from BXLS. We have not
received any payments or revenue from collaborations other than nonrefundable
upfront, milestone, and cost sharing payments from our collaborations with
AbbVie and Kyowa Kirin, from the Development Agreement with BXLS, and from
reimbursements of expenses under the terms of our agreement with Kyowa Kirin. We
have incurred losses in each year since our inception, other than in 2014. As of
March 31, 2022, we had $532.0 million of cash and cash equivalents and an
accumulated deficit of $1,329.5 million. We continue to incur significant
research and development and other expenses related to our ongoing operations.
Despite contractual product development commitments and the potential to receive
future payments from Kyowa Kirin, we anticipate that we will continue to incur
losses for the foreseeable future, and we anticipate that our losses will
increase as we continue our development of, seek regulatory approval for, and
potentially commercialize our product candidates. If we do not successfully
develop and obtain regulatory approval of our existing product candidates or any
future product candidates and effectively manufacture, market, and sell any
products that are approved, we may never generate revenue from product sales.
Furthermore, even if we do generate revenue from product sales, we may never
again achieve or sustain profitability on a quarterly or annual basis. Our prior
losses, combined with expected future losses, have had and will continue to have
an adverse effect on our stockholders' equity and working capital. Our failure
to become and remain profitable could depress the market price of our Class A
common stock and could impair our ability to raise capital, expand our business,
diversify our product offerings, or continue our operations.

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

                                       26
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Financial Operations Overview

Revenue

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

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

Research and development costs

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

Research and development costs include:

•

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

•

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

•

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

•

laboratory and supplier fees related to the performance of preclinical and non-clinical studies and clinical trials;

•

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

•

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

•

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

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

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We base our expense accruals related to clinical trials on our estimates of the
services received and efforts expended pursuant to contracts with multiple
research institutions and CROs that conduct and manage clinical trials on our
behalf. The financial terms of these agreements vary from contract to contract
and may result in uneven payment flows. Payments under some of these contracts
depend on factors such as the successful enrollment of patients and the
completion of clinical trial milestones. In accruing costs, we estimate the time
period over which services will be performed and the level of effort to be
expended in each period.

To date, we have not experienced material changes in our estimates of accrued
research and development expenses after a reporting period. However, due to the
nature of estimates, we cannot assure you that we will not make changes to our
estimates in the future as we become aware of additional information about the
status or conduct of our clinical trials and other research activities.

Currently, Kyowa Kirin has allowed us to conduct clinical studies of bardoxolone
in certain rare forms of kidney diseases in Japan and has reimbursed us the
majority of the costs for our CARDINAL study in Japan. Kyowa Kirin is the
in-country caretaker in our FALCON study in Japan and we are reimbursing Kyowa
Kirin for the costs of a certain number of patients in the study.

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

                                                2022         2021
                                                 (in thousands)
Bardoxolone                                   $  6,462     $ 11,386
Omaveloxolone                                    7,597        2,473
RTA 901                                          1,407          706

Other research and development expenses (1) 24,338 20,315 Total research and development expenses $39,804 $34,880

(1) RTA 1701 expenses have been included in other research and development expenses due to development updates in the program.

The program-specific expenses summarized in the table above include costs that
we directly allocate to our product candidates. Our other research and
development expenses include salaries, benefits, stock-based compensation and
preclinical, research, and discovery costs, which we do not allocate on a
program-specific basis.

General and administrative expenses

General and administrative expenses consist primarily of employee-related
expenses for executive, operational, finance, legal, compliance, and human
resource functions. Other general and administrative expenses include personnel
expense, facility-related costs, professional fees, accounting and legal
services, depreciation expense, other external services, and expenses associated
with obtaining and maintaining our intellectual property rights.

We anticipate that our general and administrative expenses will increase in the
future as we increase our headcount to support our continued research and
development and potential commercialization of our product candidates. We have
also incurred, and anticipate incurring in the future, increased expenses
associated with being a public company, including exchange listing and SEC
requirements, director and officer insurance premiums, legal, audit and tax
fees, compliance with the Sarbanes-Oxley Act, regulatory compliance programs,
and investor relations costs. Additionally, if and when we believe the first
regulatory approval of one of our product candidates appears likely, we
anticipate an increase in payroll and related expenses as a result of our
preparation for commercial operations, especially for the sales and marketing of
our product candidates.

Other Income (Expense), Net

Other income (expense) includes interest and gains earned on our cash and cash
equivalents, amortization of debt issuance costs, imputed interest on long term
payables, foreign currency exchange gains and losses, and non-cash interest
expense on liability related to the sale of future royalties.

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Benefit from (Provision for) Income Taxes

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

Operating results

Comparison of the three months ended March 31, 2022 and 2021 (unaudited)

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

                                      2022              2021           Change $         Change %
                                             (in thousands, except for percentage data)
Collaboration revenue
License and milestone             $        893       $       795     $         98               12
Other revenue                               21               149             (128 )            (86 )
Total collaboration revenue                914               944              (30 )             (3 )

Expenses

Research and development                39,804            34,880            4,924               14
General and administrative              24,841            20,704            4,137               20
Depreciation                               308               274               34               12
Total expenses                          64,953            55,858            9,095               16
Other income (expense), net             (9,772 )         (12,556 )          2,784               22
Loss before taxes on income            (73,811 )         (67,470 )         (6,341 )             (9 )
Benefit from (provision for)
taxes on income                            (31 )              15              (46 )             **
Net loss                          $    (73,842 )     $   (67,455 )   $     (6,387 )             (9 )

** Percentage not significant

Revenue

License and milestone revenue represented approximately 98% and 84% of total
revenue for the three months ended March 31, 2022 and 2021, respectively, and
consisted of the recognition of Kyowa Kirin deferred revenue. License and
milestone revenue increased by 12% during the three months ended March 31, 2022,
compared to the three months ended March 31, 2021, primarily due to the
achievement of a regulatory milestone in July 2021, variable consideration
previously considered constrained, under the Kyowa Kirin Agreement.

Other income was not significant for the three months ended March 31, 2022and 2021.

Expenses

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

                                           % of Total                    % of Total
                               2022         Expenses         2021         Expenses
                                   (in thousands, except for percentage data)
Research and development     $ 39,804               61 %   $ 34,880               62 %
General and administrative     24,841               38 %     20,704               37 %
Depreciation                      308                1 %        274                1 %
Total expenses               $ 64,953                      $ 55,858




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Research and development costs

Research and development expenses increased by $4.9 million, or 14%, for the
three months ended March 31, 2022, compared to the three months ended March 31,
2021. The increase was primarily due to increased personnel and
personnel-related costs to support the product development activities.

Research and development expenses, as a percentage of total expenses, was 61%
and 62% for the three months ended March 31, 2022 and 2021, respectively. The
decrease of 1% was due to the proportionately larger increase in general and
administrative expenses, compared to research and development expenses.

General and administrative expenses

General and administrative expenses increased by $4.1 million, or 20%, for the
three months ended March 31, 2022, compared to the three months ended March 31,
2021. The increase was primarily due to rent expense related to the new
headquarters building lease that commenced in December 2021.

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

Other income (expenses), net

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

We periodically reassess the expected royalty payments under the Development
Agreement, and to the extent such payment is greater or less than the initial
estimate, we adjust the amortization. Based on our review in the current first
quarter of 2022, we lowered our previous estimate of future sales for which
royalties will be paid. Accordingly, we have prospectively adjusted and
recognized lower non-cash interest expense during the quarter ended March 31,
2022.

Benefit from (Provision for) Income Taxes

The benefit of (Provision for) income taxes was not significant for the three months ended March 31, 2022 and 2021.

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Cash and capital resources

Since our inception, we have funded our operations primarily through
collaboration and license agreements, the sale of preferred and common stock,
the sale of royalty interests, and secured loans. Through March 31, 2022, we
have raised gross cash proceeds of $476.6 million through the sale of
convertible preferred stock and $785.0 million from payments under license and
collaboration agreements. We also obtained $1,222.1 million in net proceeds from
our initial public offering, follow-on offerings, and the sale of our Class A
common stock under the Purchase Agreement, and $299.0 million in net proceeds
from the sale of future royalties under the Development Agreement. We have not
generated any revenue from the sale of any products. As of March 31, 2022, we
had available cash and cash equivalents of approximately $532.0 million. Our
cash and cash equivalents are invested in accordance with our investment policy,
primarily with a view to liquidity and capital preservation.

Cash flow

The following table presents the main sources and uses of cash for each of the three months ended March, 31st:

                                            2022          2021
                                              (in thousands)

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

Net change in cash and cash equivalents ($58,279) ($40,526)

Operating Activities

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

Net cash used in operating activities was $45.0 million for the three months
ended March 31, 2021, consisting primarily of a net loss of $67.5 million
adjusted for non-cash items including stock-based compensation expense of $14.7
million, non-cash interest expense on liability related to the sale of future
royalties of $10.9 million, depreciation, amortization of issuance costs,
imputed interest expense of $2.0 million, and a net increase in operating assets
and liabilities of $5.1 million. The significant items in the change in
operating assets that impacted our use of cash in operations include a decrease
of $9.3 million in accrued direct research and other current and long-term
liabilities primarily due to the change in timing of bonus payments from
December to March of the following year, which began with the December 2020
payments being delayed to March 2021, and to the termination of PAH-related
studies and the completion of CARDINAL and MOXIe clinical trials, offset by an
increase in accounts payable of $3.6 million due to timing of payments.

Investing activities

Net cash used in investing activities was $0.3 million and $0.2 million for the three months ended March 31, 2022 and 2021, respectively, consisting of purchases of property, plant and equipment.

Fundraising activities

Net cash provided by financing activities was $0.2 million and $4.7 million for the three months ended March 31, 2022 and 2021, respectively, consisting of stock option exercises.

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Working capital requirements

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

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

•

In December 2021we obtained control of the building and therefore recognized the right-of-use assets and lease liabilities in the fourth quarter of 2021.

•

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

•

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

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

In December 2020we closed a subsequent public offering of 2,000,000 Class A common shares for gross proceeds of $281.7 million. The net proceeds we received from the offering were approximately $277.5 millionafter deducting subscription discounts and commissions and offering costs.

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

Our longer term liquidity requirements will require us to raise additional
capital, such as through additional equity, debt, or royalty financings or
collaboration arrangements. Our future capital requirements will depend on many
factors, including the receipt of milestones under our Kyowa Kirin Agreement and
the timing of our expenditures related to clinical trials. We believe our
existing cash and cash equivalents will be sufficient to enable us to fund our
operations through the fourth quarter of 2024. However, we anticipate
opportunistically raising additional capital before that time through equity
offerings, collaboration or license agreements, additional debt financings, or
royalty financings in order to maintain adequate capital reserves. In addition,
we may choose to raise additional capital at any time for the further
development of our existing product candidates and may also need to raise
additional funds sooner to pursue other development activities related to
additional product candidates. Decisions about the timing or nature of any
financing will be based on, among other things, our perception of our liquidity
and of the market opportunity to raise equity, debt, or royalty financing.
Additional securities may include common stock, preferred stock, or debt
securities. We may explore strategic collaborations or license arrangements for
any of our product candidates. If we do explore any arrangements, there can be
no assurance that any agreement will be reached, and we may determine to cease
exploring a potential transaction for any or all of the assets at any time. If
an agreement is reached, there can be no assurance that any such transaction
would provide us with a material amount of additional capital resources.

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Until we can generate a sufficient amount of revenue from our product
candidates, if ever, we expect to finance future cash needs through public or
private equity or debt offerings, loans, royalty financings, and collaboration
or license transactions. Recent and continued volatility in global financial
markets may reduce our ability to access capital, which could negatively affect
our liquidity. Additional capital may not be available on reasonable terms, if
at all. If we are unable to raise additional capital in sufficient amounts or on
terms acceptable to us, we may have to significantly delay, scale back, or
discontinue the development or commercialization of one or more of our product
candidates. If we raise additional funds through the issuance of additional
equity or debt securities, it could result in dilution to our existing
stockholders or increased fixed payment obligations, and any such securities may
have rights senior to those of our common stock. If we incur indebtedness or
obtain royalty financing, we could become subject to covenants that would
restrict our operations and potentially impair our competitiveness, such as
limitations on our ability to incur additional debt, limitations on our ability
to acquire, sell, or license intellectual property rights, and other operating
restrictions that could adversely affect our ability to conduct our business,
and any such debt or royalty financing could be secured by some or all of our
assets. Any of these events could significantly harm our business, financial
condition, and prospects. For a description of the numerous risks and
uncertainties associated with product development and raising additional
capital, see "Risk Factors" included in our Annual Report on Form 10-K for the
year ended December 31, 2021.

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

•

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

•

the number and characteristics of product candidates we are pursuing;

•

the costs of our product candidate development efforts that are not reimbursed by our collaborators;

•

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

•

continuing our existing collaboration with Kyowa Kirin and entering into new collaborations and receiving any collaboration payments;

•

the time and unreimbursed costs required to bring products to market in territories in which our product candidates are approved for sale;

•

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

•

the level of reimbursement or third-party payment pricing available for our products;

•

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

•

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

•

the costs associated with being a public company;

•

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

•

the costs we incur in filing, prosecuting, maintaining and defending our portfolio of patents and other intellectual property rights.

If we are unable to expand our business or take advantage of our business opportunities because we lack capital, our business, financial condition and results of operations could be materially adversely affected.

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Contractual obligations and commitments

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

                                                        Payments due by period
                                  Less than       1 to 3        4 to 5       6 years and
                                   1 year          years         years         beyond          Total
                                                       (unaudited, in thousands)

Operating lease obligations(1) $12,633 $17,448 $27,831

  $   179,687     $ 237,599
Total contractual obligations    $    12,633     $  17,448     $  27,831    

$179,687 $237,599

(1) The table above assumes that a one-year rent reduction is applied from June 2023 following FDA approval of omaveloxolone.

The terms of the Development Agreement require us to pay potential future
royalty payments based on product development success. The above table excludes
such obligations as the amount and timing of such obligations are unknown or
uncertain, which are further described in Note 4, Liability Related to Sale of
Future Royalties, to Consolidated Financial Statements contained in this
Quarterly Report on Form 10-Q.

Clinical tests

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

Critical Accounting Policies and Significant Judgments and Estimates

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

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

Off-balance sheet arrangements

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

Recent accounting pronouncements

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

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