REATA PHARMACEUTICALS INC [RETA] Filings

10-Q 1 reta-20220331.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-37785

Reata Pharmaceuticals, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware		11-3651945
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

5320 Legacy Drive Plano, Texas		75024
(Address of principal executive offices)		(Zip Code)

(972) 865-2219

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Class A Common Stock, Par Value $0.001 Per Share

RETA

NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, an emerging growth company, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 4, 2022, the registrant had 31,543,735 shares of Class A common stock, $0.001 par value per share, and 4,919,249 shares of Class B common stock, $0.001 par value per share, outstanding.

TABLE OF CONTENTS


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		Page
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		1
DEFINED TERMS		3
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	4
	Consolidated Balance Sheets	4
	Consolidated Statements of Operations	5
	Consolidated Statements of Stockholders’ Equity (Deficit)	6
	Consolidated Statements of Cash Flows	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	37
Signatures		38

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. In this Quarterly Report on Form 10-Q, all statements, other than statements of historical or present facts, including statements regarding our future financial condition, future revenues, projected costs, prospects, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “believe,” “will,” “may,” “might,” “estimate,” “continue,” “anticipate,” “intend,” “target,” “project,” “model,” “should,” “would,” “plan,” “expect,” “predict,” “could,” “seek,” “goals,” “potential,” and similar terms or expressions that concern our expectations, strategy, plans, or intentions. These forward-looking statements include, but are not limited to, statements about:

•

our expectations regarding the timing, costs, conduct, and outcome of our clinical trials, including statements regarding the timing of the initiation and availability of data from such trials;

•

the timing and likelihood of regulatory filings and approvals for our product candidates;

•

whether regulatory authorities determine that additional trials or data are necessary in order to accept a new drug application for review and/or approval;

•

our ability to obtain funding for our operations, including funding necessary to complete further development and commercialization of our product candidates;

•

our plans to research, develop, and commercialize our product candidates;

•

the manufacturing, supply, and commercialization of our product candidates, if approved;

•

the rate and degree of market acceptance of our product candidates;

•

our expectations regarding the potential market size and the size of the patient populations for our product candidates, if approved for commercial use, and the potential market opportunities for commercializing our product candidates;

•

the success of competing therapies that are or may become available;

•

our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates;

•

the ability to license additional intellectual property relating to our product candidates and to comply with our existing license agreements;

•

our ability to maintain and establish relationships with third parties, such as contract research organizations (CROs), contract manufacturing organizations, suppliers, and distributors;

•

our ability to maintain and establish collaborators with development, regulatory, and commercialization expertise;

•

our ability to attract and retain key scientific or management personnel;

•

our ability to grow our organization and increase the size of our facilities to meet our anticipated growth;

•

the accuracy of our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing;

•

our expectations related to the use of our available cash;

•

our ability to develop, acquire, and advance product candidates into, and successfully complete, clinical trials;

•

the initiation, timing, progress, and results of future preclinical studies and clinical trials, and our research and development programs;

•

the impact of governmental laws and regulations and regulatory developments in the United States and foreign countries;

•

developments and projections relating to our competitors and our industry; and

•

the impact of the coronavirus disease (COVID-19) on our clinical trials, our supply chain, and our operations; and

•

other risks and uncertainties, including those described under the heading “Risk Factors” included in our most recent Annual Report on Form 10-K for the year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission (SEC) on February 28, 2022.

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

DEFINED TERMS

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


Abbreviated Term		Defined Term
AbbVie		AbbVie Inc.
ADPKD		Autosomal dominant polycystic kidney disease
ADL		Activities of Daily Living
AE		Adverse event
ALS		Amyotrophic lateral sclerosis
ATP		Adenosine triphosphate
bardoxolone		Bardoxolone methyl
BXLS		Blackstone Life Sciences, LLC
CKD		Chronic kidney disease
CMC		Chemistry manufacturing controls
COVID-19		Coronavirus disease
CRL		Complete Response Letter
CRO		Contract research organization
DPNP		Diabetic peripheral neuropathic pain
eGFR		Estimated glomerular filtration rate
EMA		European Medicines Agency
ESKD		End stage kidney disease
Exchange Act		Securities Exchange Act of 1934
FA		Friedreich’s ataxia
FDA		United States Food and Drug Administration
GFR		Glomerular filtration rate
Kyowa Kirin		Kyowa Kirin Co., Ltd.
LTIP Plan		Second Amended and Restated Long Term Incentive Plan
MAA		Marketing Authorization Application
mFARS		Modified Friedreich’s Ataxia Rating Scale
NDA		New Drug Application
PGIC		Patient global impression of change
PK		Pharmacokinetic
Registrational trial		An adequate and well-controlled trial designed to be sufficient to apply for regulatory approval of a drug candidate, although notwithstanding the Company’s design a regulatory agency may determine that further clinical studies or data are required
RSU		Restricted Stock Unit
SAE		Serious adverse event
SEC		U.S. Securities and Exchange Commission
U.S. GAAP		Accounting principles generally accepted in the United States

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Reata Pharmaceuticals, Inc.

Consolidated Balance Sheets

(in thousands, except share data)


	March 31, 2022			December 31, 2021
	(unaudited)
Assets
Cash and cash equivalents	$	531,979		$	590,258
Prepaid expenses and other current assets		5,357			6,217
Total current assets		537,336			596,475
Property and equipment, net		11,202			11,604
Operating lease right-of-use-assets		131,178			126,777
Other assets		152			160
Total assets	$	679,868		$	735,016
Liabilities and stockholders’ equity
Accounts payable		9,015			13,505
Accrued direct research liabilities		14,930			14,249
Other current liabilities		13,778			21,450
Operating lease liabilities, current		5,142			3,142
Deferred revenue		755			1,648
Total current liabilities		43,620			53,994
Other long-term liabilities		5			—
Operating lease liabilities, noncurrent		136,445			132,891
Liability related to sale of future royalties, net		372,013			362,142
Total noncurrent liabilities		508,463			495,033
Commitments and contingencies
Stockholders’ equity:
Common stock A, $0.001 par value: 500,000,000 shares authorized; issued and outstanding – 31,525,514 and 31,478,197 at March 31, 2022 and December 31, 2021, respectively		31			31
Common stock B, $0.001 par value: 150,000,000 shares authorized; issued and outstanding – 4,919,249 and 4,919,249 at March 31, 2022 and December 31, 2021, respectively		5			5
Additional paid-in capital		1,457,222			1,441,584
Accumulated deficit		(1,329,473	)		(1,255,631	)
Total stockholders’ equity		127,785			185,989
Total liabilities and stockholders’ equity	$	679,868		$	735,016

See accompanying notes.

Reata Pharmaceuticals, Inc.

Unaudited Consolidated Statements of Operations

(in thousands, except share and per share data)


	Three Months Ended
	March 31
	2022			2021
Collaboration revenue
License and milestone	$	893		$	795
Other revenue		21			149
Total collaboration revenue		914			944
Expenses
Research and development		39,804			34,880
General and administrative		24,841			20,704
Depreciation		308			274
Total expenses		64,953			55,858
Other income (expense), net		(9,772	)		(12,556	)
Loss before taxes on income		(73,811	)		(67,470	)
Benefit from (provision for) taxes on income		(31	)		15
Net loss	$	(73,842	)	$	(67,455	)
Net loss per share—basic and diluted	$	(2.03	)	$	(1.86	)
Weighted-average number of common shares used in net loss per share basic and diluted		36,412,621			36,203,631

See accompanying notes.

Reata Pharmaceuticals, Inc.

Unaudited Consolidated Statements of Stockholders’ Equity

(in thousands, except share and per share data)


	Three Months Ended March 31, 2022
	Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital		Deficit			Equity
Balance at December 31, 2021		31,478,197	$	31		4,919,249		$	5	$	1,441,584	$	(1,255,631	)	$	185,989
Net loss		—		—		—			—		—		(73,842	)		(73,842	)
Compensation expense related to stock options		—		—		—			—		15,444		—			15,444
Exercise of options		—		—		9,375			—		194		—			194
Issuance of common stock upon vesting of restricted stock units		35,107		—		2,835			—		—		—			—
Conversion of common stock Class B to Class A		12,210		—		(12,210	)		—		—		—			—
Balance at March 31, 2022		31,525,514	$	31		4,919,249		$	5	$	1,457,222	$	(1,329,473	)	$	127,785


	Three Months Ended March 31, 2021
	Common Stock A				Common Stock B					Additional Paid-In		Total Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital		Deficit			Equity
Balance at December 31, 2020		31,109,154	$	31		5,044,931		$	5	$	1,375,640	$	(958,245	)	$	417,431
Net loss		—		—		—			—		—		(67,455	)		(67,455	)
Compensation expense related to stock options		—		—		—			—		14,679		—			14,679
Exercise of options		—		—		112,423			—		4,678		—			4,678
Issuance of common stock upon vesting of restricted stock units						3,302
Conversion of common stock Class B to Class A		251,102		—		(251,102	)		—		—		—			—
Balance at March 31, 2021		31,360,256	$	31		4,909,554		$	5	$	1,394,997	$	(1,025,700	)	$	369,333

See accompanying notes.

Reata Pharmaceuticals, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)


	Three Months Ended
	March 31
	2022			2021
Operating activities
Net loss	$	(73,842	)	$	(67,455	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		308			274
Amortization of debt issuance costs and imputed interest		—			1,714
Non-cash interest expense on liability related to sale of future royalty		9,871			10,925
Stock-based compensation expense		15,444			14,679
Changes in operating assets and liabilities:
Income tax receivable and payable		—			(22	)
Prepaid expenses, other current assets and other assets		877			1,330
Accounts payable		(4,525	)		3,629
Accrued direct research, other current and long-term liabilities		(8,914	)		(9,301	)
Operating lease obligations		3,489			11
Deferred revenue		(893	)		(795	)
Net cash used in operating activities		(58,185	)		(45,011	)
Investing activities
Purchases of property and equipment		(288	)		(193	)
Net cash used in investing activities		(288	)		(193	)
Financing activities
Exercise of options		194			4,678
Net cash provided by financing activities		194			4,678
Net decrease in cash and cash equivalents		(58,279	)		(40,526	)
Cash and cash equivalents at beginning of year		590,258			818,150
Cash and cash equivalents at end of period	$	531,979		$	777,624
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations	$	4,885		$	—
Purchases of equipment in accounts payable, accrued direct research, other current, and long-term liabilities	$	2,258		$	28
Acquisition of property and equipment through tenant improvement allowance	$	—		$	2,495

See accompanying notes.

Reata Pharmaceuticals, Inc.

Notes to Unaudited Consolidated Financial Statements

1. Description of Business

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

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

Prior period reclassifications

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

2. Summary of Significant Accounting Policies

Basis of Presentation

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

Summary of Significant Accounting Policies

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

3. Collaboration Agreements

Subsequent to the 2019 reacquisition of certain rights originally licensed to AbbVie Inc. (AbbVie) (see AbbVie below), the Company’s collaboration revenue and deferred revenue have been generated primarily from licensing fees and reimbursements for expenses received under our exclusive license with Kyowa Kirin (the Kyowa Kirin Agreement).

Kyowa Kirin

In December 2009, the Company entered into an exclusive license with Kyowa Kirin to develop and commercialize bardoxolone in the licensed territory. The terms of the agreement include payment to the Company of a nonrefundable, up-front license fee of $35.0 million and additional development and commercial milestone payments. As of March 31, 2022, the Company has received $50.0 million related to regulatory development milestone payments from Kyowa Kirin and has the potential in the future to achieve another $47.0 million from regulatory milestones and $140.0 million from commercial milestones. The Company also has the potential to achieve tiered royalties ranging from the low teens to the low 20 percent range, depending on the country of sale and the amount of annual net sales, on net sales by Kyowa Kirin in the licensed territory. The Company is participating on a joint steering committee with Kyowa Kirin to oversee the development and commercialization activities related to bardoxolone. Any future milestones and royalties received are subject to mid to lower single digit percent declining tiered commissions to certain consultants as compensation for negotiations of the Kyowa Kirin Agreement.

The up-front payment and regulatory milestones are accounted for as a single unit of accounting. The Company regularly evaluates its remaining performance obligation under the Kyowa Kirin Agreement. Accordingly, revenue may fluctuate from period to period due to changes to its estimated performance obligation period and variable considerations. The Company began recognizing revenue related to the up-front payment upon execution of the Kyowa Kirin Agreement.

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

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

AbbVie

In September 2010, the Company entered into a license agreement with AbbVie (the AbbVie License Agreement) for an exclusive license to develop and commercialize bardoxolone in the Licensee Territory (as defined in the AbbVie License Agreement).

In December 2011, the Company entered into a collaboration agreement with AbbVie (the Collaboration Agreement) to jointly research, develop, and commercialize the Company’s portfolio of second and later generation oral Nrf2 activators.

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

The Company recognized interest expense related to the Reacquisition Agreement of approximately $1.7 million, during the three months ended March 31, 2021. As of March 31, 2022, the Company has fully satisfied its payable to AbbVie, therefore no interest expense was recognized for the three months ended March 31, 2022.

4. Liability Related to Sale of Future Royalties

On June 24, 2020, the Company closed on the Development and Commercialization Funding Agreement with an affiliate of Blackstone Life Sciences, LLC (BXLS), which provides funding for the development and commercialization of bardoxolone for the treatment of CKD caused by Alport syndrome, autosomal dominant polycystic kidney disease (ADPKD), and certain other rare CKD indications in return for future royalties (the Development Agreement). The Development Agreement includes a $300.0 million payment by an affiliate of BXLS in return for various percentage royalty payments on worldwide net sales of bardoxolone, once approved in the United States or certain specified European countries, by Reata and its licensees, other than Kyowa Kirin. The royalty percentage will initially be in the mid-single digits and, in future years, can vary between higher-mid single digit percentages to low-single digit percentages depending on various milestones, including indication approval dates, cumulative royalty payments, and cumulative net sales. Pursuant to the Development Agreement, we have granted BXLS a security interest in substantially all of our assets. After a bardoxolone product approval has been obtained by the Company, the Company is obligated to make certain minimum cumulative payment amounts in 2025 through 2033, but only until BXLS has achieved certain internal rate of return target.

In addition, concurrent with the Development Agreement, the Company entered into a common stock purchase agreement (the Purchase Agreement) with affiliates of BXLS to sell an aggregate of 340,793 shares of the Company’s Class A common stock at $146.72 per share for a total of $50.0 million.

The Company concluded that there were two units of accounting for the consideration received, comprised of the liability related to the sale of future royalties and the common shares. The Company allocated the $300.0 million from the Development Agreement and $50.0 million from the Purchase Agreement between the two units of accounting on a relative fair value basis at the time of the transaction. The Company allocated $294.5 million, which includes $0.8 million in transaction costs incurred, in transaction consideration to the liability, and $55.5 million to the common shares. The Company determined the fair value of the common shares based on the closing stock price on the June 24, 2020, the closing date of the Development Agreement. The effective interest rate under the Development Agreement, including transaction costs, is approximately 13.8%. The Company reassessed the expected royalty payments and lowered our previous estimate of future sales for which royalties will be paid. Accordingly, we have prospectively adjusted and recognized lower non-cash interest expense using a 10.9% effective interest rate, as of March 31, 2022.

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


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

5. Other Income (Expense), Net


	Three Months Ended
	March 31
	2022			2021
	(in thousands)
Other income (expense), net
Investment income	$	132		$	80
Interest expense		—			(1,714	)
Non-cash interest expense on liability related to sale of future royalty		(9,871	)		(10,925	)
Other income (expense)		(33	)		3
Total other income (expense), net	$	(9,772	)	$	(12,556	)

Investment Income

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

Interest Expense

Interest expense consists primarily of the imputed interest from amount due to AbbVie under the Reacquisition Agreement.

Non-Cash Interest Expense on Liability Related to Sale of Future Royalties

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

Other Income (Expense)

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

6. Leases

The Company headquarters is located in Plano, Texas, where it leases approximately 122,000 square feet of office space. The Company leases additional space located in Irving, Texas, where it leases approximately 34,890 square feet of office and laboratory space.

On February 4, 2022, the Company extended the lease for the office and laboratory space in Irving, Texas, to October 31, 2024, with an option to extend for a fixed twelve-month period.

On March 8, 2022, the Company extended the lease for the Plano office to December 31, 2023.

The Company has an additional lease of a single-tenant, build-to-suit building of approximately 327,400 square feet of office and laboratory space located in Plano, Texas with an initial lease term of 16 years. The Company entered into the lease agreement on October 15, 2019 (the 2019 Lease Agreement), and at the Company’s option, it may renew the lease for two consecutive five-year renewal periods or one ten-year renewal period. On December 15, 2021, the Company obtained control of the space, and, accordingly, the Company recorded related right-of-use assets and the lease liabilities during the fourth quarter of 2021. The Company recorded the liability associated with the 2019 Lease Agreement at the present value of the lease payments not yet paid, using the discount rate as of the commencement date. As the discount rate implicit in the 2019 Lease Agreement was not readily determinable, the Company utilized its incremental borrowing rate. The renewals are not assumed in the determination of the lease term, since they are not deemed to be reasonably assured at the inception of the lease. At inception, the Company recorded $124.5 million as a right-of-use asset, which represented a lease liability of $133.2 million, net of $8.7 million of lease incentives recognized.

For the three months ended March 31, 2022, the Company paid $0.8 million for amounts included in the measurement of lease liabilities. During the three months ended March 31, 2022, and 2021, the Company recorded total rent expense of $4.3 million and $0.8 million, respectively.

Supplemental balance sheet and other information related to the Company’s operating leases is as follows:


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

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


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

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

7. Income Taxes

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


	Three Months Ended
	March 31
	2022			2021
	(in thousands, except for percentage data)
Benefit from (provision for) taxes on income	$	(31	)	$	15
Effective income tax rate		0.0	%		0.0	%

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

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

8. Stock-Based Compensation

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


	Three Months Ended
	March 31
	2022		2021
	(in thousands)
Research and development	$	7,606	$	6,808
General and administrative		7,838		7,871
Total stock compensation expense	$	15,444	$	14,679

Restricted Stock Units (RSUs)

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


	Number of RSUs			Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2022		809,145		$	66.91
Granted		513,559			27.36
Vested		(37,942	)		110.88
Forfeited		(67,917	)		71.76
Outstanding at March 31, 2022		1,216,845		$	48.58

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

Stock Options

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


	Number of Options			Weighted- Average Price
Outstanding at January 1, 2022		4,743,180		$	86.06
Granted		1,110,981			27.78
Exercised		(9,375	)		21.25
Forfeited		(175,492	)		114.33
Expired		(7,468	)		145.19
Outstanding at March 31, 2022		5,661,826		$	73.78
Exercisable at March 31, 2022		3,013,168		$	59.05

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

REATA PHARMACEUTICALS INC [RETA] Filings
10-Q	[2022-05-10]
10-K	[2022-02-28]
10-Q	[2021-11-08]
10-Q	[2021-08-09]
10-Q	[2021-05-06]
10-K	[2021-03-01]
10-Q	[2020-11-09]
10-Q	[2020-08-10]
10-Q	[2020-05-11]
10-K	[2020-02-19]
10-Q	[2019-11-12]
10-Q	[2019-08-08]
10-Q	[2019-05-09]
10-K	[2019-02-28]
10-Q	[2018-11-07]
10-Q	[2018-08-08]
10-Q	[2018-05-08]
10-K	[2018-03-02]
10-Q	[2017-11-13]
10-Q	[2017-08-14]
10-Q	[2017-05-10]
10-K	[2017-03-03]
S-1	[2016-12-06]
10-Q	[2016-11-14]
10-Q	[2016-08-11]
S-1	[2016-01-04]