REATA PHARMACEUTICALS INC (Form: 10-Q, Received: 11/14/2016 07:06:36)

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 September 30, 2016

☐	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.)

2801 Gateway Dr, Suite 150 Irving, Texas		75063
(Address of principal executive offices)		(Zip Code)

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

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

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

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

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒ (Do not check if a small reporting company)	Small reporting company	☐

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 November 10, 2016, the registrant had 8,310,113 shares of Class A common stock, $0.001 par value per share, and 14,026,267 shares of Class B common stock, $0.001 par value per share, outstanding.

TABLE OF CONTENTS

		Page
CAUTIONARY STATEMENT		3
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	4
	Consolidated Balance Sheets	4
	Consolidated Statements of Operations	5
	Consolidated Statements of Cash Flows	6
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Mine Safety Disclosures	33
Item 5.	Other Information	33
Item 6.	Exhibits	34
Signatures		35

CAUTIONARY NOTE REGARDING F ORWARD-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. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans, and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “goals,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” “could,” “should,” and similar expressions are intended to identify forward-looking statements. 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;

•	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;

•	our expectations related to the use of our available cash;

•	estimates of our expenses, future revenue, capital requirements, and our needs for additional financing;

•	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 scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates;

•	our ability to maintain and establish collaborations or obtain additional funding;

•	our ability to maintain and establish relationships with third parties, such as contract research organizations, suppliers, and distributors;

•	our expectations regarding the time during which we will be an emerging growth company under the JOBS Act;

•	our ability to establish and maintain arrangements for manufacture of our product candidates;

•	the impact of governmental laws and regulations;

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

•

other risks and uncertainties, including those described under the heading “Risk Factors” included in our final prospectus, or Final Prospectus, dated May 25, 2016, and filed with the U.S. Securities and Exchange Commission, or SEC, pursuant to Rule 424b under the Securities Act of 1933, or the Securities Act, on May 26, 2016.

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. Factors that may cause actual results to differ materially from current expectations include, among other things, those described under the heading “Risk Factors” in the Final Prospectus and discussed elsewhere in this Quarterly Report on Form 10-Q. 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.

PART I - FINANCI AL INFORMATION

Item 1. Financial Statements.

Reata Pharmaceuticals, Inc.

Consolidated Balance Sheets

(in thousands, except share data)

	September 30, 2016 (unaudited)			December 31, 2015
Assets
Cash and cash equivalents	$	95,660		$	42,008
Federal income tax receivable		—			31,926
Prepaid expenses and other current assets		4,260			3,325
Total current assets		99,920			77,259
Property and equipment, net		899			1,142
Other assets		1,004			553
Total assets	$	101,823		$	78,954

Liabilities and stockholders’ deficit
Accounts payable	$	1,296		$	3,531
Accrued direct research liabilities		4,424			3,529
Other current liabilities		4,756			4,030
Current portion of deferred revenue		49,595			49,730
Total current liabilities		60,071			60,820
Other long-term liabilities		94			249
Deferred revenue, net of current portion		253,947			291,041
Total noncurrent liabilities		254,041			291,290
Commitments and contingencies
Stockholders’ deficit:
Common stock A, $0.001 par value: 500,000,000 shares authorized; issued and outstanding – 7,758,499 and 0 shares at September 30, 2016 and December 31, 2015		8			—
Common stock B, $0.001 par value: 150,000,000 shares authorized; issued and outstanding – 14,577,568 and 15,998,106 shares at September 30, 2016 and December 31, 2015		15			16
Additional paid-in capital		72,987			10,036
Shareholder notes receivable		(81	)		(81	)
Accumulated deficit		(285,218	)		(283,127	)
Total stockholders’ deficit		(212,289	)		(273,156	)
Total liabilities and stockholders’ deficit	$	101,823		$	78,954

See accompanying notes.

Reata Pharmaceuticals, Inc.

Unaudited Consolidated Statements of Operations

(in thousands, except share and per share data)

	Three Months ended						Nine Months ended
	September 30,						September 30,
	2016			2015			2016			2015
Collaboration revenue
License and milestone	$	12,500		$	12,500		$	37,230		$	37,794
Other revenue		51			—			125			—
Total collaboration revenue		12,551			12,500			37,355			37,794
Expenses
Research and development		9,300			8,550			27,681			26,816
General and administrative		4,039			2,980			11,783			9,203
Depreciation and amortization		170			486			537			1,548
Total expenses		13,509			12,016			40,001			37,567
Other income
Investment income		62			9			113			25
Total other income		62			9			113			25
(Loss) income before provision (benefit) for taxes on income		(896	)		493			(2,533	)		252
Provision (benefit) for taxes on income		1			(140	)		(442	)		(44	)
Net (loss) income	$	(897	)	$	633		$	(2,091	)	$	296
Net (loss) income per share—basic	$	(0.04	)	$	0.04		$	(0.11	)	$	0.02
Net (loss) income per share—diluted	$	(0.04	)	$	0.04		$	(0.11	)	$	0.02
Weighted-average number of common shares used in net (loss) income per share basic		22,324,374			15,979,614			18,970,128			15,974,510
Weighted-average number of common shares used in net (loss) income per share diluted		22,324,374			16,149,149			18,970,128			16,082,963

See accompanying notes.

Reata Pharmaceuticals, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

	Nine Months ended
	September 30,
	2016			2015
Operating activities
Net (loss) income	$	(2,091	)	$	296
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization		537			1,548
Stock-based compensation expense		1,451			1,019
Provision for deferred taxes on income		—			13,427
Loss on disposal of property and equipment		—			2
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(2,899	)		(327	)
Other assets		(451	)		282
Accounts payable		(2,235	)		665
Accrued direct research and other current liabilities		2,869			1,576
Federal income tax receivable/payable		31,926			(13,470	)
Deferred revenue		(37,230	)		(37,095	)
Net cash used in operating activities		(8,123	)		(32,077	)
Investing activities
Purchases of property and equipment		(281	)		(257	)
Net cash used in investing activities		(281	)		(257	)
Financing activities
Proceeds from issuance of common stock from initial public offering, net of issuance costs		64,705			—
Payments on deferred offering costs		(2,531	)		(343	)
Exercise of options and related tax withholdings		(73	)		15
Payment of capital lease obligation		(45	)		(45	)
Net cash provided by (used in) financing activities		62,056			(373	)
Net increase (decrease) in cash and cash equivalents		53,652			(32,707	)
Cash and cash equivalents at beginning of year		42,008			87,758
Cash and cash equivalents at end of period	$	95,660		$	55,051
Supplemental disclosures
Income taxes paid	$	18		$	—
Purchases of equipment in accounts payable and other current liabilities	$	13		$	—
Vested prepaid restricted stock	$	348		$	348

See accompanying notes.

Reata Pharmaceuticals, Inc.

Notes to Unaudited Consolidated Financial Statements

1. Description of Business

Reata Pharmaceuticals, Inc., or the Company, is a clinical stage biopharmaceutical company located in Irving, Texas focused on identifying, developing, and commercializing product candidates to address rare and life-threatening diseases with few or no approved therapies by targeting molecular pathways involved in how cells produce energy and regulate inflammation. The Company operates as a single segment of business.

The Company’s lead product candidates, bardoxolone methyl and omaveloxolone, are members of a class of small molecules called antioxidant inflammation modulators and target an important transcription factor, called Nrf2, to restore mitochondrial function, reduce oxidative stress, and resolve inflammation. Bardoxolone methyl is in Phase 3 clinical development for the treatment of pulmonary arterial hypertension associated with connective tissue disease (CTD-PAH), and Phase 2 clinical development for the treatment of pulmonary hypertension due to interstitial lung disease and pulmonary arterial hypertension, each of which are subsets of pulmonary hypertension (PH). The Company began enrolling patients in its Phase 3 trial in CTD-PAH in October 2016. In addition, the Company recently met with the U.S. Food and Drug Administration and received guidance on endpoints and general design for a single, pivotal Phase 2/3 trial in chronic kidney disease caused by Alport syndrome. Omaveloxolone is in Phase 2 clinical development for the treatment of multiple diseases, including Friedreich’s ataxia, mitochondrial myopathies, and metastatic melanoma. Beyond its lead product candidates, the Company has several promising preclinical programs. The Company believes its product candidates and preclinical programs have the potential to improve clinical outcomes in numerous underserved patient populations.

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

On January 6, 2016, the Company effected a 4.4-to-1 reverse split of its common stock, and an automatic conversion of its common stock into Class B common stock. Upon the effectiveness of the reverse stock split and conversion, (i) every 4.4 shares of outstanding common stock were combined into one share of Class B common stock, (ii) the number of shares of common stock for which each outstanding option to purchase common stock is exercisable was proportionally decreased on a 4.4-to-1 basis and converted into an option to purchase Class B common stock, and (iii) the exercise price of each outstanding option to purchase common stock was proportionately increased on a 4.4-to-1 basis. All of the outstanding common stock share numbers, common stock options, share prices, exercise prices and per share amounts have been adjusted in these consolidated financial statements, on a retroactive basis, to reflect this 4.4-to-1 reverse stock split for all periods presented. The par value per share was not adjusted as a result of the reverse stock split.

On May 11, 2016, the Company effected a 1.45-to-1 reverse split of its common stock. Upon the effectiveness of the reverse stock split, (i) every 1.45 shares of outstanding common stock were combined into one share of common stock of the same class, (ii) the number of shares of common stock for which each outstanding option to purchase common stock is exercisable was proportionally decreased on a 1.45-to-1 basis, and (iii) the exercise price of each outstanding option to purchase common stock was proportionately increased on a 1.45-to-1 basis. All of the outstanding common stock share numbers, common stock options, share prices, exercise prices and per share amounts have been adjusted in these consolidated financial statements, on a retroactive basis, to reflect this 1.45-to-1 reverse stock split for all periods presented. The par value per share was not adjusted as a result of the reverse stock split.

On May 25, 2016, the Company’s registration statement on Form S-1 (File No. 333-208843) relating to its initial public offering (IPO), of its common stock was declared effective by the U.S. Securities and Exchange Commission (SEC). The shares began trading on The NASDAQ Global Market on May 26, 2016. The public offering price of the shares sold in the offering was $11.00 per share. The IPO closed on June 1, 2016 for 6,325,000 shares of its Class A common stock, which included 825,000 shares of its Class A common stock issued pursuant to the over-allotment option granted to the underwriters. The Company received total proceeds from the offering of $60.9 million, net of underwriting discounts and commissions and offering expenses.

Reata Pharmaceuticals, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

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 nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. The consolidated balance sheet at December 31, 2015 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the annual consolidated financial statements and footnotes thereto of the Company.

Revenue Recognition

The Company’s revenue to date has been generated primarily through collaborative licensing agreements with AbbVie Ltd. (AbbVie) and Kyowa Hakko Kirin Co., Ltd. Revenues for periods shown consist of the recognition of deferred revenue from upfront payments and milestone payments received in 2012 and prior years. The Company has not generated any revenue based on the sale of products.

In June 2013, the Company entered into a research collaboration with a disease advocacy organization. Under the agreement, the Company may be provided milestone payments to fund research and development activities estimated over a two-year period. The Company recorded collaboration revenue totaling $700,000 related to milestone payments during the nine months ended September 30, 2015.

Research and Development Costs

AbbVie is not currently participating in the development of bardoxolone methyl for the treatment of PH and we are therefore incurring all costs for this program. With respect to its omaveloxolone programs and its collaboration agreement with AbbVie, the Company was responsible for a certain initial amount in early development costs before AbbVie began sharing development costs equally. As of April 2016, the Company had incurred all of these initial costs, after which payments from AbbVie with respect to research and development costs incurred by the Company were recorded as a reduction in research and development expenses. The Company’s expenses were reduced by $773,000 and $1,434,000 for AbbVie’s share of research and development costs for the three months and nine months ended September 30, 2016. Accordingly, as of September 30, 2016, the Company had receivables in the amount of $1,434,000 included in prepaid expenses and other current assets on the consolidated balance sheet. The Company received $661,000 from AbbVie in October 2016.

In September 2016, the Company and AbbVie mutually agreed that the Company would continue unilateral development of omaveloxolone. Therefore, AbbVie no longer co-funds the exploratory development costs of this program, but retains the right to opt back in at certain points in development. Depending upon what point, if any, AbbVie opts back into development, AbbVie may retain its right to commercialize a product outside the U.S. or the Company may be responsible for commercializing the product on a worldwide basis. Upon opting back in, AbbVie would be required to pay an agreed upon amount of all development costs accumulated up to the point of exercising their opt-in right, after which development costs incurred and product revenue worldwide would be split equally.

The Company bases its expense accruals related to clinical trials on its estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and contract research organizations that conduct and manage clinical trials on its behalf. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing costs, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the Company does not identify costs that it has begun to incur or if the Company underestimates or overestimates the level of services performed or the costs of these services, its actual expenses could differ from its estimates.

Reata Pharmaceuticals, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

To date, the Company has not experienced significant changes in its estimates of accrued research and development expenses after a reporting period. However, due to the nature of estimates, the Company cannot ass ure that it will not make changes to its estimates in the future as the Company becomes aware of additional information about the status or conduct of its clinical trials and other research activities.

Stock-Based Compensation

The Company accounts for its equity-based compensation awards in accordance with Accounting Standard Codification ASC 718 Compensation—Stock Compensation (ASC 718). ASC 718 requires companies to recognize compensation expense using a fair value based method for costs related to stock-based payments, including stock options. The expense is measured based on the grant date fair value of the awards that are expected to vest, and the expense is recorded over the applicable requisite service period.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock option awards, which takes into consideration various factors, including the exercise price of the award, the expected term of the award, the current price of the underlying shares, the expected volatility of the underlying share price based on peer companies, forfeitures rate, and the risk-free interest rate. Prior to the Company’s IPO of its common stock, the fair values of the shares of common stock underlying the Company’s share-based awards were estimated on each grant date using a probability-weighted expected return method. Following the close of its IPO in June 2016, the fair values of its common stock underlying its share-based awards were estimated using observable market prices.

Risks and Uncertainties

The Company has experienced losses and negative operating cash flows for many years since inception and has no marketed drug or other products. The Company’s ability to generate future revenue depends upon the results of its development programs, the success of which cannot be guaranteed. The Company will need to raise additional equity capital in the future in order to fund its operations.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The fair values of the Company’s stockholder notes receivable were approximately $166,000 and $138,000 at September 30, 2016 and December 31, 2015, respectively. The fair value was calculated using an income approach to estimate the present value of expected future cash flows to be received under the notes. The measurement is considered to be based primarily on Level 3 inputs used in the calculation, including the discount rate applied and the estimate of future cash flows.

Net Income (Loss) per Share

Basic and diluted net income (loss) per common share is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period, without consideration for common stock equivalents. The Company’s potentially dilutive shares, which include unvested restricted stock and options to purchase common stock, are considered to be common stock equivalents and are only included in the calculation of diluted net income (loss) per share when their effect is dilutive. For periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

The Company uses the two-class method to compute net income (loss) per common share attributable to common stockholders because the Company has issued securities, other than Class A and Class B common stock, that contractually entitle the holders to participate in dividends and earnings of the Company. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings. Holders of restricted common stock are entitled to the dividend amount paid to common stockholders on an as-if-converted-to-common stock basis when declared by the Company’s Board of Directors. As a result, all restricted common stock are considered to be participating securities.

Reata Pharmaceuticals, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

Deferred Offering Costs

Deferred offering costs, which primarily consist of direct incremental accounting, legal, and printing fees relating to the IPO, were initially capitalized. The deferred offering costs totaling $3,489,000 were subsequently offset against IPO proceeds upon the completion of the IPO on June 1, 2016.

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), which supersedes the leases in ASC 840, Leases . This ASU requires the recognition of lease assets and lease liabilities by lessees for those leases previously classified as operating leases. The ASU is effective for public companies for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company will apply the guidance and disclosure provisions of the new standard upon adoption. The Company is currently evaluating this standard and has not yet determined what, if any, effect ASU No. 2016-02 will have on its consolidated results of operations or financial position.

In March 2016, the FASB issued ASU No. 2016-09, Compensation–Stock Compensation: Improvements to Employee Share-Based Payment Accounting, to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The ASU is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company will apply the guidance and disclosure provisions of the new standard upon adoption. The Company is currently evaluating this standard and has not yet determined what, if any, effect ASU No. 2016-09 will have on its consolidated results of operations or financial position.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The ASU is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company is currently evaluating this standard and has not yet determined what, if any, effect ASU No. 2016-15 will have on its consolidated results of operations or financial position.

3. Income Taxes

The Company’s effective tax rate varies with the statutory rate due primarily to the impact of nondeductible stock-based compensation and the changes in valuation allowance related to certain deferred tax assets generated or utilized in the applicable period. The Company’s deferred tax assets have been fully offset by a valuation allowance at September 30, 2016, and the Company expects to maintain this valuation allowance until there is sufficient evidence that future earnings can be achieved, which is uncertain at this time.

4. Stock-Based Compensation

Stock Options

The following table summarizes stock-based compensation expense reflected in the consolidated statements of operations (in thousands):

	Three Months ended				Nine Months ended
	September 30,				September 30,
	2016		2015		2016		2015
Research and development	$	375	$	164	$	725	$	519
General and administrative		341		162		726		500
		716		326		1,451		1,019

Reata Pharmaceuticals, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

The following table summarizes stock option activity as of September 30, 2016 , and changes during the nine months ended September 30, 2016 , under the 2007 Long Te rm Incentive Plan ( the 2007 LTIP ) and standalone option agreements:

	Number of Options			Weighted- Average Exercise Price
Outstanding at January 1, 2016		550,675			16.11
Granted		986,845			12.63
Exercised		(26,382	)		10.29
Forfeited		(16,536	)		11.62
Expired		(19,709	)		11.50
Outstanding at September 30, 2016		1,474,893			14.00
Exercisable at September 30, 2016		385,776			17.13

The total intrinsic value of all outstanding options and exercisable options at September 30, 2016 was $17,143,701 and $4,646,688, respectively.

5. Related-Party Transactions

The Company paid approximately $772,000 and $896,000 to certain stockholders for sponsored research, research and development consulting services, contract manufacturing services, regulatory and medical consulting services, license fees, and clinical study services during nine months ended September 30, 2016 and 2015, respectively. These amounts are recorded in research and development expense in the accompanying consolidated statements of operations.

6. Net (Loss) income per Share

The following table sets forth the computation of basic and diluted net (loss) income per share attributable to common stockholders:

	Three Months ended					Nine Months ended
	September 30,					September 30,
	2016			2015		2016			2015
Numerator
Net (loss) income (in thousands)	$	(897	)	$	633	$	(2,091	)	$	296
Denominator
Weighted-average number of common shares used in net (loss) income per share – basic		22,324,374			15,979,614		18,970,128			15,974,510
Dilutive potential common shares		—			169,535		—			108,453
Weighted-average number of common shares used in net (loss) income per share – diluted		22,324,374			16,149,149		18,970,128			16,082,963
Net (loss) income per share – basic		(0.04	)		0.04		(0.11	)		0.02
Net (loss) income per share – diluted		(0.04	)		0.04		(0.11	)		0.02

The number of weighted average options that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive represented 1,474,893 shares for the three and nine months ended September 30, 2016 and 132,918 and 126,433 shares for the three months and nine months ended September 30, 2015, respectively.

Item 2. MANAGEMENT’S D ISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 heading “Risk Factors” and discussed elsewhere in this Quarterly Report on Form 10-Q.

Overview

We are a clinical stage biopharmaceutical company focused on identifying, developing, and commercializing product candidates to address rare and life-threatening diseases with few or no approved therapies by targeting molecular pathways that regulate cellular metabolism and inflammation. Our lead product candidates, bardoxolone methyl and omaveloxolone, are members of a class of small molecules called antioxidant inflammation modulators, or AIMs, and target an important transcription factor, called Nrf2, to restore mitochondrial function, reduce oxidative stress, and resolve inflammation. Bardoxolone methyl is currently being studied in a Phase 3 trial, known as CATALYST, for the treatment of pulmonary arterial hypertension, or PAH, associated with connective tissue disease, or CTD-PAH, as well as a Phase 2 trial, known as LARIAT, for the treatment of pulmonary hypertension due to interstitial lung disease, or PH-ILD, and PAH, each of which are subsets of pulmonary hypertension, or PH. We began enrolling patients in CATALYST in October 2016. In addition, we recently met with the U.S. Food and Drug Administration, or the FDA, and received guidance on endpoints and general design for a single, pivotal Phase 2/3 trial in chronic kidney disease, or CKD, caused by Alport syndrome. Omaveloxolone is being studied in Phase 2 trials for the treatment of multiple diseases, including Friedreich’s ataxia, or FA, mitochondrial myopathies, or MM, and metastatic melanoma, known as MOXIe, MOTOR, and REVEAL, respectively. Beyond our lead product candidates, we have several promising preclinical development programs. We believe that our product candidates and preclinical programs have the potential to improve clinical outcomes in numerous underserved patient populations.

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 Ltd., or AbbVie, and Kyowa Hakko Kirin Co., Ltd., or KHK, and from sales of our securities. 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 KHK and reimbursements of expenses under the terms of our agreement with KHK. We have incurred losses in each year since our inception, other than in 2014. As of September 30, 2016, we had $95.7 million of cash and cash equivalents and an accumulated deficit of $285.2 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 our collaborators, we anticipate that, without taking into account deferred revenue, we will continue to incur losses for the foreseeable future, and we anticipate that our losses will increase as we continue our development of, and seek regulatory approval for, 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 or debt financings in order to fund our operations and execute on our business plans, and there is no assurance that such financing 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 the Final Prospectus.

Our Clinical Pipeline

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

(1)

We are currently designing a Phase 2/3 clinical trial, which we expect to initiate in the first half of 2017.

(2)

We continue to evaluate development of omaveloxolone for this indication.

Bardoxolone Methyl

Bardoxolone methyl activates molecular pathways that promote the resolution of inflammation by restoring mitochondrial function, reducing oxidative stress, and inhibiting pro-inflammatory signaling. Bardoxolone methyl binds to Keap1, which activates Nrf2, a transcription factor that promotes normal mitochondrial function, increases production of antioxidant and detoxification enzymes, reduces oxidative stress, and reduces pro-inflammatory signaling. Bardoxolone methyl is currently being tested in a Phase 3 trial in CTD-PAH as well as Phase 2 trials in several forms of PH-ILD. In addition, we recently met with the FDA and received guidance on endpoints and general design characteristics of a single, pivotal Phase 2/3 trial in CKD caused by Alport syndrome and are in the process of designing that trial.

Although CTD-PAH and Alport syndrome have different causes and inflammatory stimuli, at a molecular level, mitochondrial dysfunction, inflammation, and proliferative signaling are common to the pathophysiology of both diseases. The anti-inflammatory and anti-fibrotic properties of bardoxolone methyl may therefore be relevant to preventing remodeling of the pulmonary vasculature in CTD-PAH as well as inhibiting structural alterations and glomerulosclerosis in Alport syndrome.

Bardoxolone Methyl in Pulmonary Hypertension

Pulmonary Hypertension Overview

PH is a multi-organ condition characterized by an abnormally high pressure in the network of arteries and veins that lead to and from the lungs due, in part, to narrowing of the pulmonary vasculature as a result of inflammation, remodeling, proliferation, and endothelial dysfunction. Mitochondrial dysfunction has also been implicated in PH, and impaired energetics of skeletal muscle is a common feature of PH. PH can be caused by a number of different underlying defects, which have been classified into five groups by the World Health Organization, or WHO. We are currently studying bardoxolone methyl in CATALYST in patients with WHO Group 1 CTD-PAH. We are also studying bardoxolone methyl in patients from certain subgroups of WHO Groups 3 and 5 PH-ILD.

While there are vasodilator therapies approved for the treatment of PAH, there are currently no therapies to treat PH-ILD. Further, current therapies for PAH are less effective in CTD-PAH, which makes up about 30% of the PAH population. CTD-PAH is a late and often fatal manifestation of many types of autoimmune disease, including systemic sclerosis, or scleroderma, systemic lupus erythematosus, mixed connective tissue disease, and others. PAH results in a progressive remodeling and fibrosis of the pulmonary vasculature, which increases pulmonary vascular resistance and ultimately leads to right ventricular heart failure and death. Patients with CTD-PAH are generally less responsive to existing therapies and have shorter survival than patients with other forms of PAH. In the United States, the five-year survival rate for CTD-PAH patients is approximately 44% compared to idiopathic PAH patients, who have a 68% five-year survival rate.

Currently approved therapies to treat PAH include endothelin receptor antagonists, nitric oxide pathway modulators, and prostacyclin pathway agonists, all of which are systemic vasodilators that directly modulate vasoconstrictive and vasodilatory pathways. All three classes of existing therapies do not specifically target the pulmonary vasculature and have systemic hemodynamic effects. These systemic hemodynamic effects can result in hypotension and syncope, or fainting, which generally limits their clinical effectiveness. These hemodynamic effects can be exacerbated when a patient is pr escribed multiple vasodilators. In addition, clinically significant drug-drug interactions have been observed that can further limit the ability to deliver effective drug combinations.

Vasodilators approved for PAH also generally do not yield significant functional improvements in CTD-PAH patients because their disease involves more remodeling and fibrosis that is less affected by vasodilators. Recent research has indicated that PAH patients, and particularly CTD-PAH patients, experience mitochondrial dysfunction, which occurs in the pulmonary vasculature, heart, and other organ systems. Mitochondrial dysfunction promotes reduced energy production, inflammation, and tissue remodeling, which causes impaired cardiac and skeletal muscle function, fibrosis, and eventual death. As described in a recently published large meta-analysis performed at the University of Pennsylvania that analyzed data from eleven Phase 3 and Phase 4 clinical trials, CTD-PAH patients treated with vasodilator therapies have 6-minute walk distance, or 6MWD, improvements of only one third compared to the improvements seen in I-PAH patients.

Further, due to their vasodilatory mechanism, the efficacy of currently approved therapies is impacted by the number of other PAH therapies being administered to a patient, with each new therapy yielding lower marginal efficacy.

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

Phase 3 Development

On October 6, 2016, the first patient was enrolled in CATALYST, an international, randomized, double-blind, placebo-controlled Phase 3 trial examining the safety, tolerability, and efficacy of bardoxolone methyl in patients with WHO Group 1 CTD-PAH when added to standard-of-care vasodilator therapy. Patients will be on up to two background therapies and will be randomized 1:1 to bardoxolone methyl or placebo. Patients will be enrolled at approximately 100 sites in the U.S., Canada, Australia, Japan, Mexico, Europe, Israel, and South America, and the study drug will be administered once daily for 24 weeks. Patients randomized to bardoxolone methyl will start at 5 mg and will dose-escalate to 10 mg at Week 4 unless contraindicated clinically. The primary endpoint is the change from baseline in 6MWD relative to placebo at Week 24. Secondary endpoints include time to first clinical improvement as measured by improvement in WHO functional class, increase from baseline in 6MWD by at least 10%, or decrease from baseline in creatine kinase (as a surrogate biomarker for muscle injury and inflammation) by at least 10%. The trial will enroll between 130 and 200 patients. To determine the final sample size, a pre-specified, blinded sample size re-calculation based on 6MWD variability and baseline characteristics will be conducted after 100 patients have been enrolled in the trial. Data from CATALYST are expected to be available during the first half of 2018.

During our interaction with the FDA in October 2015, the FDA noted that CATALYST, together with the Phase 2 data from our LARIAT trial in PAH patients and prior clinical trials with bardoxolone methyl, would provide adequate data for a New Drug Application, or NDA, review of the safety profile of bardoxolone methyl. Prior to this meeting, we had completed a series of clinical pharmacology studies, including a Thorough QT study, hepatic impairment study, food effect study, and three drug-drug interaction studies. The FDA recommended conducting a single additional clinical drug-drug interaction study and otherwise had no clinical trial, clinical pharmacology, or preclinical study requests.

In preparation for, and in advance of, the initiation of CATALYST, we analyzed data for all CTD-PAH patients treated with doses of up to 10 mg who had completed the 16-week treatment period (or terminated early) in the ongoing LARIAT trial. A total of 22 CTD-PAH patients, including patients from Cohorts 1, 2, and 3a, which are discussed below, met these criteria, with 15 randomized to bardoxolone methyl and seven randomized to placebo. Baseline characteristics of the 22 CTD-PAH patients can be found in the table below.

Baseline Characteristics for CTD-PAH Pat ients in LARIAT

	Bard	Placebo
N	15	7
Mean Age (years)	56.4	52.4
Female/Male	80%/20%	100%/0%
Mean Weight (kg)	75.5	68.2
Mean BMI (kg/m^2)	27.5	26.3
WHO Functional Class:
II	9 (60%)	4 (57%)
III	6 (40%)	3 (43%)
Mean Time Since Diagnosis (years)	2.9	3.0
Mean Baseline 6MWD (m)	381	396

The LARIAT statistical analysis plan defined the treatment effect as the time-averaged change from baseline in 6MWD values using a longitudinal model to assess the average of all available 6MWD timepoints, improving the study’s sensitivity to detect a significant difference between the active drug and placebo groups. Change from baseline in 6MWD at Weeks 4, 8, 12, and 16 were analyzed using a mixed-model repeated measures, or MMRM, analysis to compare the difference between the active drug and placebo groups. The analysis showed that patients treated with bardoxolone methyl demonstrated a statistically significant mean time-averaged increase in 6MWD compared to baseline of 26.7 meters (p=0.001). Placebo-treated patients had a non-significant time-averaged mean change from baseline in 6MWD of 0.6 meters (p=0.96). The placebo-corrected time-averaged change in 6MWD was 26.1 meters (p=0.06).

Patients with moderate to severe anemia, which represents a small percentage of the patient population, will be excluded from CATALYST because treatment with iron supplementation or erythropoietin post-randomization can affect 6MWD values independent of study drug effect. Three CTD-PAH patients enrolled in LARIAT and included in the above analysis were anemic at screening (as defined by low hemoglobin values), and two of these patients, both randomized to placebo, received post-randomization anemia treatments. An analysis was conducted excluding patients with anemia at screening to estimate the treatment effect in patients who meet the final CATALYST eligibility criteria. MMRM analysis showed that CATALYST-eligible patients treated with bardoxolone methyl in LARIAT demonstrated a statistically significant mean time-averaged increase in 6MWD compared to baseline of 30.2 meters (p<0.001), and placebo-treated patients had a non-significant mean change from baseline in 6MWD of –10.1 meters (p=0.39) for a placebo-corrected change of 40.3 meters (p=0.009). The pooled standard deviation of change of 6MWD was 34.1 meters. The time-averaged change in 6MWD is shown in the table below.

Summary of Time-Averaged 6MWD Changes for CTD-PAH Patients in LARIAT

Treatment	N	All Patients		N	CATALYST-Eligible Patients
Treatment	N	Change from Baseline (m)	Placebo-corrected (m)	N	Change from Baseline (m)	Placebo-corrected (m)
Placebo	7	0.6 p=0.96	—	5	–10.1 p=0.39	—
Bardoxolone Methyl	15	26.7 p=0.001	26.1 p=0.06	14	30.2 p < 0.001	40.3 p=0.009

The method of statistical analysis for the CATALYST primary endpoint is the placebo-corrected change from baseline in 6MWD at the end-of-treatment at 24 weeks. This method allows for greater separation in 6MWD values between active and placebo groups assuming improved efficacy over time, which was observed in the CTD-PAH patients in LARIAT as shown in the figure below.

Mean Change in 6MWD (+/- SEM) Over Time in CATALYST-Eligible Patients from LARIAT

We performed an analysis applying the statistical methods for CATALYST to the available end-of-treatment (Week 16) change in 6MWD data from CTD-PAH patients in LARIAT as seen in the table below. Using MMRM to estimate change from baseline in 6MWD at Week 16, patients treated with bardoxolone methyl demonstrated a statistically significant mean increase of 38.2 meters (p<0.001). Placebo-treated patients had a non-significant mean change from baseline in 6MWD of 9.8 meters (p=0.44). The placebo-corrected change in 6MWD at Week 16 was 28.4 meters (p=0.07). Excluding patients with moderate to severe anemia at screening, the patients treated with bardoxolone methyl demonstrated a statistically significant mean increase in 6MWD compared to baseline of 42.7 meters (p<0.001). Placebo-treated patients had a non-significant mean change from baseline in 6MWD of –5.8 meters (p=0.68). The placebo-corrected change in 6MWD at Week 16 was 48.5 meters (p=0.005).

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

Treatment	N	All Patients		N	CATALYST Eligible Patients
Treatment	N	Change from Baseline	Placebo-corrected	N	Change from Baseline	Placebo-corrected
Placebo	7	9.8 p=0.44	—	5	–5.8 p=0.68	—
Bardoxolone Methyl	15	38.2 p < 0.001	28.4 p=0.07	14	42.7 p < 0.001	48.5 p=0.005

With respect to safety, bardoxolone methyl continued to be well-tolerated. None of the 15 bardoxolone methyl treated patients discontinued early, whereas one of the seven placebo treated patients discontinued prematurely. The expanded data set shows no clinically meaningful differences in safety variables including vital signs and laboratory data. Bardoxolone methyl was combined with approved vasodilator therapies without increasing the risk of hypotensive events or exacerbating their adverse event profile.

CATALYST is designed to detect a minimum treatment effect of 12.5 meters assuming a standard deviation of 50 meters. The observed treatment effect in the LARIAT CTD-PAH subgroup analyses, both with and without the anemic patients included, was larger than the minimally detectable treatment effect in CATALYST. Further, the pooled standard deviation observed in LARIAT of 37 meters is lower than the estimated standard deviation of 50 meters in CATALYST.

Phase 2 Development

We initially tested bardoxolone methyl in PH patients in LARIAT, a randomized, placebo-controlled, double-blinded, dose-escalation Phase 2 trial evaluating the safety and efficacy of once daily, orally administered bardoxolone methyl in PH patients with PAH or PH-ILD. LARIAT is comprised of four separate cohort groups.

The primary endpoint of the LARIAT trial is change in 6MWD during a 16 week treatment period. All patients who complete the treatment period are eligible to continue into an extension trial to evaluate the intermediate and long-term safety and efficacy of bardoxolone methyl. Those patients who had been receiving placebo are converted to bardoxolone methyl in the extension trial. The initial treatment period for cohorts 1 and 2 has been completed and, as discussed above, data from cohorts 1 a nd 2 have been publicly presented, as has initial data from cohort 3. We also intend to use data from CTD-PAH patients to help support an application to the FDA for breakthrough status for the treatment of CTD-PAH, once we have enough data to do so.

Because bardoxolone methyl was active in patients with CTD-PAH, a fibrotic disease, we believe that bardoxolone methyl may be effective in PH-ILD patients. We have also begun enrolling patients with PH-ILD caused by CTD, idiopathic pulmonary fibrosis, non-specific interstitial pneumonia, and sarcoidosis in LARIAT cohorts 4a, 4b, 4c, and 4d, respectively. Data have not been presented from cohort 4. We previously reported that a serious adverse event, or SAE, involving a patient death had occurred in cohort 4a and that the investigator had initially reported it as possibly related to study drug. The investigator has since changed his evaluation to unlikely related. In addition, the Protocol Safety Review Committee that oversees safety for the LARIAT trial concluded that the SAE was unlikely treatment-related. We anticipate that data from PH-ILD patients in the LARIAT trial will be available in the second half of 2017.

The cohorts from the LARIAT trial are described below.

•

Cohort 1. The first cohort began enrolling in May 2014 and consisted of PAH patients in the United States. Eligible patients must have had a baseline 6MWD of greater than or equal to 150 meters but less than or equal to 450 meters and must have been receiving at least one disease-specific PAH background therapy. Patients were randomized 3:1 in each dose group to either bardoxolone methyl at doses of 2.5 mg, 5 mg, 10 mg, or 20 mg, or placebo.

•

Cohort 2. The second cohort began enrolling in January 2015 and consisted of PAH patients in the United States. Eligible patients must have had a baseline 6MWD of greater than 450 meters and must have been receiving at least one disease-specific PAH background therapy. Patients were are randomized 3:1 in each dose group to bardoxolone methyl at doses of 5 mg or 20 mg, or placebo.

•

Cohort 3. The third cohort began enrolling in September 2015, and consis t s of PAH patients in the United States and potentially other countries, and is comprised of two sub-cohorts for CTD-PAH (cohort 3a) patients and non-CTD-PAH (cohort 3b) patient s . Eligible patients must have a baseline 6MWD of greater than or equal to 150 meters and must be receiving zero to two disease-specific PAH background therapies. Patients are randomized 2:1 to bardoxolone methyl or placebo. Patients in the treatment group are titrated from 5 mg to 10 mg doses based on tolerability.

•

Cohor t 4 . T h e fourt h cohor t began enrolling i n Septembe r 2015 , consis ts o f PH-IL D patient s i n the Unite d State s an d potentiall y othe r countries , an d i s comprise d o f fou r sub-cohort s base d o n th e patient’s underlyin g typ e o f ILD : (a ) PH-IL D cause d b y CTD , suc h a s scleroderm a an d lupus , o r CTD-PH-ILD; (b ) PH-IL D cause d b y idiopathi c pulmonar y fibrosis , o r IPF-PH-ILD ; (c ) PH-IL D cause d b y non-specific interstitia l pneumonia , o r NSIP-PH-ILD ; an d (d ) PH-IL D cause d b y sarcoidosis , o r SA-PH-ILD . Eligible patient s mus t hav e a baselin e 6MW D o f greate r tha n o r equa l t o 15 0 meters . A s n o therapie s ar e approve d t o trea t thes e patients’ PH , n o backgroun d therapie s ar e require d fo r enrollment . Patient s ar e randomize d 2: 1 t o bardoxolon e methy l o r placebo . Patient s i n th e treatmen t grou p ar e titrate d fro m 5 m g t o 1 0 m g dose s based o n tolerability .

Bardoxolone Methyl in Chronic Kidney Disease caused by Alport Syndrome

Alport Syndrome Overview

Alport syndrome is a rare and serious hereditary disease that affects approximately 12,000 children and adults in the United States and 40,000 globally. It is caused by mutations in the genes encoding type IV collagen, a major structural component of the glomerular basement membrane, or GBM, in the kidney. The abnormal expression of type IV collagen causes loss of GBM integrity, abnormal leakage of proteins through the GBM, and excessive reabsorption of protein in the proximal tubules of the kidney. Like other forms of CKD, excessive reabsorption of protein in the tubules induces oxidative stress and renal interstitial inflammation and fibrosis.

Patients with Alport syndrome are normally diagnosed with the disease in childhood to early adulthood and have average glomerular filtration rate, or GFR, declines of 4.0 mL/min/1.73 m ² per year. The progressive decline of GFR in Alport syndrome inexorably leads to renal failure and end-stage renal disease, or ESRD, with a median survival of approximately 55 years. Fifty percent of males with the most prevalent subtype of Alport syndrome require dialysis or kidney transplant by age 25. The incidence of renal failure in these patients increases to 90% by age 40 and nearly 100% by age 60. Similar to patients with other forms of CKD, Alport patients receiving dialysis are at increased risk for cardiovascular disease and infections, which are the most common causes of death in these patients. Currently, there are no approved therapies for the treatment of Alport syndrome.

The pathogenic role of inflammatory processes in Alport syndrome disease progression and declining renal function is similar to that of other chronic kidney diseases. The GBM defects and leaked proteins in Alport syndrome, the hyperglycemia in diabetes, and hypertension in cardiovascular disease all activate pro-inflammatory signaling pathways that normally detect cellular damage or pathogens. These signals induce mito chondrial dysfunction in which production of cellular energy, or ATP, is impaired in favor of production of pro-inflammatory ROS. ROS is a central feature of inflammation and activates pro-inflammatory signaling complexes including NF-κB and the NLRP3 com plex referred to as the inflammasome. ROS-mediated activation of NF-κB and the inflammasome produce cytokines that promote inflammation in glomerular endothelial cells, mesangial cells, and podocytes while also recruiting activated macrophages and other i nflammatory effector cells to the renal interstitium.

Chronic activation of pro-inflammatory pathways in kidney cells promotes GFR loss by at least three mechanisms. First, inflammation-associated ROS reduce the amount of nitric oxide available to the endothelial cells in the blood vessels of the glomerulus. This results in a decrease of the overall surface area of the glomerulus that is available for filtration, and thus decreases GFR. Second, inflammation-associated ROS cause contraction of mesangial cells in the kidney. The primary function of these cells is to remove debris and protein from the glomerular basement membrane, or GBM, allowing proper filtration to occur. Mesangial cell contraction reduces their function, and thus reduces GFR. Third, inflammation-associated ROS lead to fibrosis, which changes the structure of the mesangial cell layer and causes thickening of the GBM, contributing to decline of GFR.

Biological Rationale for Bardoxolone in Alport Syndrome

Bardoxolone methyl has the potential to address the underlying causes of GFR loss in Alport syndrome patients because it activates molecular pathways that promote the resolution of inflammation by restoring mitochondrial function, reducing oxidative stress, and inhibiting ROS-mediated pro-inflammatory signaling. Bardoxolone methyl binds to Keap1 and activates Nrf2, a transcription factor that increases cellular antioxidant and detoxification enzymes and promotes normal mitochondrial function by making reducing equivalents available for ATP production. This reduces mitochondrial ROS production and ROS-mediated activation of inflammatory signaling complexes. Through these effects, bardoxolone methyl restores mitochondrial production of ATP, increases production of antioxidant and detoxification enzymes, reduces oxidative stress, and reduces pro-inflammatory signaling. Bardoxolone methyl reverses endothelial dysfunction and pathogenic mesangial cell contraction, resulting in increased the surface area of the glomerulus and GFR. Additionally, bardoxolone methyl inhibits activation of inflammatory and pro-fibrotic pathways that lead to structural remodeling and glomerulosclerosis.

As a result, bardoxolone methyl and closely related structural analogs have been shown to improve renal function, reduce inflammation, and prevent injury, remodeling, and fibrosis in a number of animal models of renal injury and disease as seen in the table below. Specifically, bardoxolone methyl and analogs reverse endothelial dysfunction and mesangial cell contraction in response to angiotensin II, thereby increasing the surface area of the glomerulus and GFR. Further, data from animal models relevant to chronic renal disease demonstrate that the compounds are anti-fibrotic and have protective effects on the renal interstitium in response to high protein, pressure overload in the setting of hyperfiltration, and dyslipidemia.

Bardoxolone Methyl and Analogs are Active in Multiple Animal Models Relevant to Renal Disease

Model

General Findings

Protein overload ¹

- Reduced oxidative/nitrosative stress, interstitial inflammation, and fibrogenic mediators including TGF-β and α-SMA

- Decreased proteinuria and tubular damage

Angiotensin II-induced GFR decline ²

- Increased inulin clearance by increasing K _f without affecting BP or renal plasma flow

- Reduced whole glomeruli and mesangial cell contraction due to angiotensin II

5/6 nephrectomy ³

- Reversed endothelial dysfunction and impaired Nrf2 activity in arterial tissue

- Ameliorated hyperfiltration-induced glomerulosclerosis and tubular injury

- Suppressed renal inflammation and infiltration of lymphocytes and macrophages

- Mitigated systolic blood pressure increase caused by chronic renal failure

12-month monkey safety study ⁴

- Improved kidney function for 12 months without adverse renal histological effects

- Induced renal Nrf2 targets and suppressed megalin

High-fat (HF) diet-induced CKD ⁵

- Prevented HF diet-induced development of structural changes in the heart and kidneys

- Prevented HF diet-induced renal corpuscle hypertrophy

Lupus nephritis ⁶

- Attenuated renal disease and reduced glomerulonephritis in 3 different models of lupus nephritis

- Decreased proteinuria and BUN

Ischemic-reperfusion ⁷

- Prevented structural injury from ischemia acute kidney injury

- Pre-treatment preserved renal function following ischemic surgery

FeNTA-induced acute kidney injury ⁸

- Prevented acute kidney injury and preserved renal function

- Reduced severity of proximal tubule degeneration and necrosis

Cisplatin-induced acute kidney injury ⁹

- Protected against cisplatin-induced renal toxicity

- Reduced proximal tubule degeneration, apoptosis, necrosis, and inflammation

Zoja C, Corna D, Locatelli M, et al. Targeting Keap1-Nrf2 Pathway Ameliorates Renal Inflammation and Fibrosis in Mice with Protein-Overload Proteinuria. Poster American Society of Nephrology Meeting, 2010.

Ding Z, Stidham RD, Bumeister R, Trevino I, Winters A, Sprouse M, Ding M, Ferguson DA, Meyer CJ, Wigley WC, Ma R. The synthetic triterpenoid, RTA 405, increases the glomerular filtration rate and reduces angiotensin II–induced contraction of glomerular mesangial cells. Kidney Intl 2013;83:845-854.

Aminzadeh MA, Reisman SA, Vaziri ND, et al. The synthetic triterpenoid RTA dh404 (CDDO-dhTFEA) restores endothelial function impaired by reduced Nrf2 activity in chronic kidney disease. Redox Biol 2013;1:527-31.

⁴

Reisman SA, Chertow GM, Hebbar S, Vaziri ND, Ward KW, Meyer CJ. Bardoxolone Methyl Decreases Megalin and Activates Nrf2 in the Kidney. J Am Soc Nephrol 2012;23(10):1663-1673.

⁵

Camer D, Yu Y, Szabo A, et al. Bardoxolone methyl prevents the development and progression of cardiac and renal pathophysiologies in mice fed a high-fed diet. Chem Biol Interact 2016;243:10-18.

⁶

Wu T, Ye Y, Min SY, Zhu J, Khobahy E, Zhou J, Yan M, Hemachandran S, Pathak S, Zhou XJ, Andreeff M, Mohan C. Targeting multiple signaling axes and oxidative stress using a synthetic triterpenoid prevents murine lupus nephritis. Arthritis Rheumatol 2014;66(11):3129–3139.

⁷

Wu QQ, Wang Y, Senitko M, Meyer C, Wigley WC, Ferguson DA, Grossman E, Chen J, Zhou XJ, Hartono J, Winterberg P, Chen B, Agarwal A, Lu CY. Bardoxolone methyl (BARD) ameliorates ischemic AKI and increases expression of protective genes Nrf2, PPARy, and HO-1 Targeting multiple signaling axes and oxidative stress using a synthetic triterpenoid prevents murine lupus nephritis. Am J Physiol Renal Physiol 2011;300:F1180–F1192.

⁸

Tanaka Y, Aleksunes LM, Goedken MJ, Chen C, Reisman SA, Manautou JE, Klaassen CD. Coordinated induction of Nrf2 target genes protects against iron nitrilotriacetate (FeNTA)-induced nephrotoxicity. Toxicology and Applied Pharmacology 2008;231:364–373.

⁹

Aleksunes L, Reisman SA, Yeager RL, Goedken MJ, Klaassen CD. Nuclear Factor Erythroid 2-Related Factor 2 Deletion Impairs Glucose Tolerance and Exacerbates Hyperglycemia in Type 1 Diabetic Mice. Am Soc Pharmacology and Experimental Therapeutics 2010;333:140-151.

Regulatory Interaction on Alport Syndrome

During a meeting with the FDA in October 2016, the FDA provided us with guidance on key elements of a single, pivotal clinical trial that would study the safety and efficacy of bardoxolone methyl in patients with CKD caused by Alport syndrome. We initially proposed a Phase 2 trial in Alport patients; however, the FDA suggested a potentially more efficient path to registration utilizing a single trial with estimated GFR, or eGFR, based endpoints.

We are in the process of designing the Phase 2/3 pivotal trial. Based on the guidance from the FDA, the trial will be an international, multi-center, double-blind, randomized, placebo-controlled trial. It will study the safety, tolerability, and efficacy of bardoxolone methyl in qualified patients with Alport syndrome from age 12 to 60 with eGFR values between 30 to 90 mL/m in/1.73 m ² at up to 60 sites. The Phase 2 portion of the trial will be open-label and the primary endpoint will assess eGFR change in approximately 30 patients at 12 weeks. These patients will be followed for two years and will not be included in the Phase 3 portion of the trial. The Phase 3 portion will be designed to support registration. Up to 180 patients will be randomized 1:1 to either bardoxolone methyl o r placebo. The eGFR change at one year will be measured after 48 weeks while the patient is on treatment, and after withdrawal of drug for four weeks (retained eGFR). After withdrawal, patients will be restarted on study drug with their original treatment assignments and will continue on study drug for a second year. The change from baseline in eGFR in bardoxolone methyl-treated patients relative to placebo will be measured again after two years. The eGFR change at two years will also be measured after 100 weeks while the patient is on treatment and after withdrawal of drug for four weeks (retained eGFR). If the trial is successful, the year one retained eGFR data could support accelerated approval under subpart H of the Federal Food, Drug, and Cosmetic Act, or the FD&C Act, and the year two retained eGFR data could support full approval under the FD&C Act.

Clinical Experience with Bardoxolone Methyl in CKD caused by Type 2 Diabetes

In addition to preclinical models of chronic renal disease, bardoxolone methyl has been studied in seven studies of patients with CKD from type 2 diabetes that enrolled approximately 2,600 patients. Reata conducted six Phase 2 studies that demonstrated significant improvements in renal function evidenced by increases in eGFR and creatinine clearance as well as reductions in uremic solutes BUN, uric acid, and phosphate in inverse correlation with eGFR. These studies included the BEAM study, a randomized, placebo-controlled 52-week Phase 2 study in diabetic CKD patients. BEAM enrolled primarily moderate or Stage 3 CKD patients and demonstrated that eGFR improvements were sustained for 52 weeks on treatment and that eGFR at week 56, four weeks after withdrawal of drug, was greater than both baseline and placebo eGFR values. The BEAM data demonstrated that a portion of the on treatment eGFR improvement was retained after withdrawal of drug and suggested that bardoxolone methyl had disease-modifying activity in CKD from type 2 diabetes.

On the basis of the Phase 2 results, Reata conducted BEACON, a large, multinational Phase 3 study in patients with Stage 4 CKD and type 2 diabetes. BEACON was designed to measure time to ESRD, and it enrolled only patients with severe or Stage 4 CKD. During October 2012, BEACON was terminated early in response to the independent data monitoring committee’s recommendation to stop the trial for safety concerns. At the time, nothing was known about the cause or timing of the safety events or whether these events might worsen. After the trial was terminated, analysis revealed that there was a small but significant imbalance in heart failure events of 5.0% on placebo and 8.8% on active drug, and the primary reason for the increase in heart failure events was fluid overload that occurred in the first four weeks after randomization. Patients with fluid overload events who were treated with intravenous diuretics resolved their symptoms, and there was no increase in risk for fluid overload, as compared to placebo, after the first four weeks of treatment.

Further investigation, including additional preclinical studies, indicated that bardoxolone methyl modulates the endothelin pathway. In Stage 4 and 5 CKD patients, the endothelin pathway is dysregulated and, under certain circumstances, activation of this pathway can put these patients at greater risk for fluid retention. Patients who have less compromised renal function do not have dysregulation of this pathway, and their kidneys are able to excrete excess fluid. Similar fluid overload events had been observed previously in late-stage CKD patients treated with other therapies, including endothelin receptor antagonists, or ERAs, which are vasodilating agents that are currently approved for the treatment of PAH. Post-hoc analysis from BEACON identified three major risk factors as predictors of fluid overload events: Stage 4 CKD, prior hospitalization for heart failure, and baseline elevation in B-type natriuretic peptide or BNP, a clinical chemistry measure of fluid overload. Patients without these risk factors showed no imbalance in heart failure events or mortality, which is consistent with the Phase 2 studies conducted by Reata that primarily enrolled Stage 3 CKD patients and did not show a risk of fluid overload.

Recently, Reata’s Asian development partner, KHK, announced interim results from their Phase 2 trial, TSUBAKI, showing that bardoxolone methyl treatment resulted in a significant improvement in measured GFR, as assessed by inulin clearance, after 16 weeks of treatment compared to placebo. Inulin clearance is the most rigorous technique to determine measured GFR. Moreover, the increase in inulin clearance is similar in magnitude to the changes in eGFR reported in other studies with bardoxolone methyl. In addition, in other CKD studies, bardoxolone methyl significantly increased creatinine clearance, significantly reduced uremic solutes (BUN, uric acid, and phosphate) in inverse correlation to eGFR increases, and numerically reduced renal SAEs and ESRD events. These data support that the increases in eGFR observed in seven CKD studies of bardoxolone methyl treatment reflect actual increases in GFR and support the use of eGFR as a reliable marker of renal function. Below is an overview of renal improvements that have been shown in clinical trials with bardoxolone.

Overview of Bardoxolone Methyl Studies Demonstrating Improvements in Renal Function


Study	Phase/Country	Patient Population	Mean Placebo-corrected ∆eGFR (mL/min/1.73m ² ) ^a
402-C-0903 (BEACON)	3/Global	CKD/Diabetes	6.4 (p<0.001 vs PBO) ^c
402-C-0804 (BEAM)	2/US	CKD/Diabetes	8.6 (p<0.001 vs PBO)
RTA402-005 (TSUBAKI)	2/Japan	CKD/Diabetes	Data not yet publicly disclosed
402-C-0902	2/US	CKD/Diabetes	6.5 (p<0.001) ^b
402-C-0801 (Stratum 1)	2a/US	CKD/Diabetes	6.7 (p<0.001) ^b
402-C-0801 (Stratum 2)	2b/US	CKD/Diabetes	7.2 (p<0.001) ^b,c
402-C-1102	1/US	CKD/Diabetes	9.0 (p<0.05) ^b
402-C-0501	1/US	Cancer	18.2 (p<0.0001) ^b
402-C-0702	1/2/US	Cancer	32.2 (p=0.001) ^b
402-C-1302 (LARIAT)	2/US	Pulmonary hypertension	14.7 (p<0.001 vs PBO)

Unless noted, data are differences between mean eGFR changes from baseline for bardoxolone methyl versus placebo groups and p-values calculated comparing the difference in means between bardoxolone methyl and placebo groups.

Data are mean eGFR changes from baseline for bardoxolone methyl patients and p-values are calculated from two-sided paired t-tests comparing eGFR change to 0.

Study also demonstrated a significant increase in creatinine clearance.

In addition to the eGFR increase data, two separate studies, BEAM and BEACON, which included approximately 600 patients treated for one year or longer, showed that increases in eGFR in CKD patients treated with bardoxolone methyl were sustained for at least one year. In BEACON, bardoxolone methyl patients had mean increases in eGFR through Week 48 of 5.5 mL/min/1.73 m ² . In contrast, placebo-treated patients experienced a mean decline in eGFR of -0.9 mL/min/1.73 m ² , corresponding to a relative difference between groups of 6.4 mL/min/1.73 m ² (p<0.001). The figure below shows the change in eGFR over time for both placebo and bardoxolone methyl patients in the BEACON trial demonstrating a durable response through at least one year.

One Year of Treatment with Bardoxolone Methyl in Stage 4 CKD Patients (BEACON)

Additionally, as shown in the table below, in BEACON, at 48 weeks, bardoxolone methyl significantly reduced the proportion of patients with an eGFR loss of 3, 5, or 7.5 mL/min/1.73 m ² , which represents losses of approximately 13%, 22%, and 33%, respectively, of baseline eGFR. The proportion of patients with a loss of eGFR of 30% from baseline at any visit was reduced by 67% (p<0.001).

Percentage of Patients with Large Losses of Kidney Function in BEACON

Decliner Category	BARD	PBO	p-value
∆eGFR < -3.0 by WK48	20%	67%	p<0.001
∆eGFR < -5.0 by WK48	14%	37%	p<0.001
∆eGFR < -7.5 by WK48	8%	16%	p<0.01
∆eGFR < -30% (any visit)	4%	12%	p<0.001

After one year of treatment, a residual eGFR increase from baseline was observed in bardoxolone methyl patients after cessation of drug for four weeks, while an eGFR decline from baseline was observed in placebo patients. These data suggest that the maladaptive structural deficits that contribute to declining kidney function may be improved over the course of longer-term treatment with bardoxolone methyl.

Retained eGFR Benefit After Withdrawal of Bardoxolone Methyl

	Baseline eGFR	Placebo-Corrected eGFR Change Post-Withdrawal	p-value
BEAM (n=172)
Low Dose	33	0.6	p>0.05
Mid Dose	32	4.7	p<0.05
High Dose	32	5.0	p<0.05
BEACON (n=498)
20mg	23	1.8	p<0.001

We believe that the improvements in renal function noted in many studies with bardoxolone methyl coupled with the BEACON data demonstrating reduced risk of loss of kidney function suggest that bardoxolone methyl may have the potential to prevent renal function decline, which may translate to a multi-year delay in disease progression to ESRD for patients with Alport syndrome.

Omaveloxolone

Omaveloxolone is a close structural analog of bardoxolone methyl that was developed to improve tissue distribution, including blood-brain barrier penetration. To date, omaveloxolone has been administered orally to patients with FA, MM, and solid tumors, and has been administered topically to patients receiving cataract surgery and suffering from radiation dermatitis. We believe that an omaveloxolone-induced increase in mitochondrial energy production could have beneficial effects on multiple organ systems, with the most profound effects being in skeletal muscle, the brain and other tissues with a high energy demand.

Omaveloxolone for the Treatment of Friedreich’s Ataxia

We are evaluating omaveloxolone in FA in MOXIe, a randomized, placebo-controlled, double-blind, dose-escalation Phase 2 trial to evaluate the safety and efficacy of omaveloxolone in up to 100 patients with FA at sites in the United States, Europe and Australia. Based on discussions with the FDA in 2014, MOXIe is designed in two parts, with the first primarily focused on the evaluation of safety of omaveloxolone in doses ranging from 2.5 mg to 300 mg and the second focused on efficacy. Data for multiple endpoints are being collected, with the primary efficacy endpoint being the change in peak work, as measured by exercise testing on a recumbent bicycle, and the secondary endpoint being assessment based on the neurological component of the Friedreich’s Ataxia Rating Scale, or FARS. Data from the first part of MOXIe are expected in the first half of 2017, and we expect to initiate the second part of MOXIe after receiving these data.

Omaveloxolone for the Treat ment of Mitochondrial Myopathies

We are evaluating omaveloxolone in MOTOR, a randomized, placebo-controlled, double-blind, dose-escalation Phase 2 trial to evaluate the safety and efficacy of omaveloxolone in up to 100 patients with MM. MOTOR is being conducted at sites in the United States and Europe. Based on discussions with the FDA in 2014, MOTOR is designed in two parts, with the first primarily focused on the evaluation of safety of omaveloxolone in doses ranging from 2.5 mg to 160 mg and the second primarily focused on efficacy. Data for multiple endpoints are being collected, with the primary efficacy endpoint being the change in peak work, as measured by exercise testing on a recumbent bicycle, and the secondary endpoint being change in patients’ 6MWD. Data from the first part of MOTOR are expected in the first half of 2017, and we expect to initiate the second part of MOTOR after receiving these data.

Omaveloxolone for Immuno-Oncology

We are evaluating omaveloxolone in the REVEAL trial, an open-label, multi-center, dose-escalation Phase 1b/2 trial to evaluate the safety, pharmacodynamics, and efficacy of omaveloxolone, in combination with existing immunotherapies, in patients with metastatic melanoma at sites in the United States. We are using omaveloxolone in combination with checkpoint inhibitors to restore an immune response against the tumor in the presence of so-called myeloid-derived suppressor cells, which mask the tumor from the immune system by production of mitochondrial ROS. In REVEAL, patients receive omaveloxolone monotherapy for one week, followed by omaveloxolone in combination with the labeled treatment course of either Yervoy® or Opdivo ®. Data from REVEAL are expected in the second half of 2017.

Omaveloxolone for the Prevention of the Loss of Corneal Endothelial Cells during Cataract Surgery

We evaluated omaveloxolone in the GUARD trial, a multi-center, randomized, double-masked, vehicle-controlled, parallel group Phase 2 trial conducted at sites in the United States to evaluate a topical ophthalmic formulation of omaveloxolone in 307 patients undergoing cataract surgery. While the primary endpoint, which was loss of corneal endothelial cells, after cataract surgery, was not attained and no treatment effect was observed at the high dose, promising pharmacological activity was seen at the low dose of 0.5%. We continue to evaluate the best indications for which to develop and commercialize omaveloxolone.

Preclinical Programs

Additional AIM Indications

Our AIM pharmacology may provide therapeutic benefit for patients suffering from diseases other than those we are currently testing in clinical trials where inflammation, oxidative stress, mitochondrial dysfunction and tissue remodeling are implicate d . We continue to evaluate disease models, preclinical information, and information from our clinical trials to determine where AIMs may be beneficial.

Neuroprotective Hsp90 Inhibitors

We are pursuing preclinical development of non-AIM neuroprotective Hsp90 inhibitors, including RTA 901, for the potential treatment of amyotrophic lateral sclerosis, diabetic neuropathy, spinocerebellar ataxia, and spinal bulbar muscular atrophy. Our Hsp90 inhibitors are highly potent and selective C-terminal inhibitors of Hsp90. Inhibition of Hsp90 may result in activation of Hsp70, a molecular chaperone that plays a critical role in the process through which a protein assumes its functional shape and that serves as a central gatekeeper for mitochondrial protein import. Mitochondria rely on Hsp70-dependent protein import mechanisms for almost all of their activity, including the production of ATP. There are also indications that Hsp70 activation may play a profound role in neuroprotection since nerve cells are high consumers of ATP and rely on Hsp70-dependent protein import for proper mitochondrial function.

In January 2016, the FDA informed us that they were imposing a clinical hold on our IND for RTA 901 pending resolution of some outstanding questions related to our animal toxicology studies, in which no adverse effects were identified. We are collaborating with the FDA to understand and resolve these outstanding questions.

RO R γ T Inhibitors

We are pursuing preclinical development of novel, small-molecule, orally bioavailable RO R γT inhibitors. RO R γT is the master regulator of human T Helper 17, or Th17, cellular differentiation, function, and cytokine production, and represents a compelling target for a variety of autoimmune and inflammatory conditions. Th17 cells produce cytokines, including IL-17, that play a critical role in driving immune-mediated inflammation and are implicated in the pathogenesis of certain autoimmune disease s . The efficacy of suppressing IL-17 as a means of treating these conditions has been demonstrated both in animal models and in humans.

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 other 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 our collaborative licensing agreements with AbbVie and KHK and consists of upfront payments and milestone payments. Under our revenue recognition policy, license revenue associated with upfront, non-refundable license payments received under the collaboration agreements with AbbVie and KHK are recognized ratably over the expected term of the performance obligations under the agreements, which extend through various periods beginning in 2017 and ending in 2026. License revenue recorded with respect to the collaboration agreements with AbbVie consists solely of the recognition of deferred revenue. License revenue recorded with respect to the collaboration agreements with KHK consists of the recognition of deferred revenue and reimbursement of supply costs.

We also have other license revenue, which consists of milestone payments from a disease advocacy organization in 2015, and other revenue, which consists of reimbursements from KHK for expenses incurred to obtain drug supplies.

Research and Development Expenses

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 September 30, 2016, we have incurred a total of $466.4 million in research and development expense, a majority of which relates to the development of bardoxolone methyl 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 expenses include:

•

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

•

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

•

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

•

laboratory and vendor expenses related to the execution of preclinical and non-clinical studies, and clinical trials;

•

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

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 contract research organizations, or 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. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates.

To date, we have not experienced significant changes in our estimates of accrued research and development expenses after a reporting period. However, due to the nature of estimates, we cannot as sure 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, AbbVie is not participating in the development of bardoxolone methyl for the treatment of PH and we are therefore incurring all costs for this program. With respect to our omaveloxolone programs and our collaboration agreement with AbbVie, we were responsible for a certain initial amount in early development costs before AbbVie began sharing development costs equally. In April 2016, we had incurred all of these initial costs, after which payments from AbbVie with respect to research and development costs incurred by us were recorded as a reduction in research and development expenses. Our expenses were reduced by $0.8 million for AbbVie’s share of research and development costs for the three months ended September 30, 2016 and we had related receivables from AbbVie in the amount of $1.4 million as of September 30, 2016. We received $0.6 million from AbbVie in October 2016.

In September 2016, we and AbbVie mutually agreed that we would continue unilateral development of omaveloxolone. Therefore, AbbVie no longer co-funds the exploratory development costs of this program, but retains the right to opt back in at certain points in development. Depending upon what point, if any, AbbVie opts back into development, AbbVie may retain its right to commercialize a product outside the U.S. or we may be responsible for commercializing the product on a worldwide basis. Upon opting back in, AbbVie would be required to pay an agreed upon amount of all development costs accumulated up to the point of exercising their opt-in right, after which development costs incurred and product revenue worldwide would be split equally.

The following table summarizes our research and development expenses incurred:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
	(unaudited)
	(in thousands)
Bardoxolone methyl	$	4,508	$	1,565	$	11,725	$	4,107
Omaveloxolone		725		2,329		3,539		9,651
RTA 901		303		1,978		1,880		4,473
Other research and development expenses		3,764		2,678		10,537		8,585
Total research and development expenses	$	9,300	$	8,550	$	27,681	$	26,816

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 research and development 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 increased expenses associated with being a public company, including exchange listing and Securities and Exchange Commission requirements, director and officer insurance premium, legal, audit and tax fees, 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

Other income represents interest and gains earned on our cash and cash equivalents, which include money market funds.

Provision for Taxes on Income

Provision for taxes on income consists of net loss, taxed at federal tax rates and adjusted for certain permanent differences. We maintain a valuation allowance against the majority of our net deferred tax assets. Changes in this valuation allowance also affect the tax provision.

Results of Operations

Comparison of the three months ended September 30, 2016 and 2015 (unaudited)

The following table sets forth our results of operations for the three months ended September 30:

	2016			2015			Change $			Change %
	(unaudited)
	(in thousands, except percentage data)
Consolidated Statements of Operations Data
Collaboration revenue
License and milestone	$	12,500		$	12,500			—			—
Other revenue		51			—			51			100
Total collaboration revenue		12,551			12,500			51			—
Expenses
Research and development		9,300			8,550			750			9
General and administrative		4,039			2,980			1,059			36
Depreciation and amortization		170			486			(316	)		(65	)
Total expenses		13,509			12,016			1,493			12
Total other income		62			9			53			589
(Loss) income before provision (benefit) for taxes on income		(896	)		493			(1,389	)		(282	)
Provision (benefit) for taxes on income		1			(140	)		141			101
Net loss	$	(897	)	$	633			(1,530	)		(242	)

Revenue

Revenue is consistent for the three months ended September 30, 2016, compared to the three months ended September 30, 2015, and primarily consists of the recognition of deferred revenue.

The following table summarizes the sources of our revenue for the three months ended September 30:

	2016		2015
	(unaudited)
	(in thousands)
License and milestone
AbbVie license agreement	$	5,396	$	5,396
AbbVie collaboration agreement		6,717		6,717
KHK agreement		387		387
Total license and milestone		12,500		12,500
Other revenue		51		—
Total collaboration revenue	$	12,551	$	12,500

Research and Development Expenses

Research and development expenses increased by $0.8 million, or 9%, for the three months ended September 30, 2016, compared to the three months ended September 30, 2015. The increase was primarily due to increases of $2.9 million in clinical activities for bardoxolone methyl in PAH and PH-ILD, $0.4 million in non-clinical research development activities, and $0.7 million in personnel expense to support growth in our development activities, offset by decreases of $1.6 million related to clinical activities for omaveloxolone related to completion of clinical activities on our topical programs in 2015 and AbbVie’s share of development cost related to the omaveloxolone program in 2016 and $1.6 million related to IND directed preclinical activities for RTA 901 in 2015 compared to primarily toxicology work to resolve outstanding questions on the IND in 2016.

General and Administrative Expenses

General and administrative expenses increased by $1.1 million, or 36%, for the three months ended September 30, 2016, compared to the three months ended September 30, 2015. The increase was primarily due to increased insurance coverage and legal and accounting expenses in connection with being a public company and to expenses related to our overall growth in our development activities, including increases in commercial research consulting activities and personnel expenses.

Investment Income

Investment income was immaterial for the three months ended September 30, 2016 and 2015.

Provision (Benefit) for Taxes on Income

Provision (benefit) for taxes on income decreased by $0.1 million, or 101%, for the three months ended September 30, 2016, compared to the three months ended September 30, 2015, due to differences in income generated and changes in the valuation allowance.

Comparison of the nine months ended September 30, 2016 and 2015

The following table sets forth our results of operations for the nine months ended September 30:

	2016			2015			Change $			Change %
	(unaudited)
	(in thousands, except percentage data)
Consolidated Statements of Operations Data
Collaboration revenue
License and milestone	$	37,230		$	37,794			(564	)		(1	)
Other revenue		125			—			125			100
Total collaboration revenue		37,355			37,794			(439	)		(1	)
Expenses
Research and development		27,681			26,816			865			3
General and administrative		11,783			9,203			2,580			28
Depreciation and amortization		537			1,548			(1,011	)		(65	)
Total expenses		40,001			37,567			2,434			6
Total other income		113			25			88			352
(Loss) income before provision (benefit) for taxes on income		(2,533	)		252			(2,785	)		(1,105	)
(Benefit) provision for taxes on income		(442	)		(44	)		(398	)		(905	)
Net loss	$	(2,091	)	$	296			(2,387	)		(806	)

Revenue

Revenue decreased by $0.4 million, or 1%, for the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015. The decrease was primarily due to a decrease in milestone revenue from a disease advocacy organization received in 2015.

The following tabl e summarizes the sources of our revenue for the nine months ended September 30 :

	2016		2015
	(in thousands)
License and milestone
AbbVie license agreement	$	16,073	$	16,015
AbbVie collaboration agreement		20,004		19,931
KHK agreement		1,153		1,148
Other revenue		—		700
Total license and milestone	$	37,230	$	37,794
Other revenue		125		—
Total collaboration revenue	$	37,355	$	37,794

Research and Development Expenses

Research and development expenses increased by $0.9 million, or 3%, for the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015. The increase was primarily due to increases of $7.6 million in clinical activities for bardoxolone methyl in PAH and PH-ILD, $0.4 million in non-clinical research development activities, and $1.6 million in personnel expense to support growth in our development activities, offset by decreases of $6.1 million related to clinical activities for omaveloxolone related to completion of clinical activities on our topical programs in 2015 and AbbVie’s share of development cost related to the omaveloxolone program in 2016 and $2.6 million related to IND directed preclinical activities for RTA 901 in 2015 compared to primarily toxicology work to resolve outstanding questions on the IND in 2016.

General and Administrative Expenses

General and administrative expenses increased by $2.6 million, or 28%, for the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015. The increase was primarily due to increased insurance coverage and legal and accounting expenses in connection with being a public company and to expenses related to our overall growth in our development activities, including increases in commercial research and investor relations consulting activities and personnel expenses.

Investment Income

Investment income was immaterial for the nine months ended September 30, 2016 and 2015.

(Benefit) Provision for Taxes on Income

(Benefit) provision for taxes on income increased by $0.4 million, or 905%, for the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015, due to differences in income generated and changes in the valuation allowance.

Liquidity and Capital Resources

Since our inception, we have funded our operations primarily through the sale of preferred and common stock and collaboration and license agreements. To date, we have raised gross cash proceeds of $476.6 million through the sale of convertible preferred stock and received $750 million from payments under license and collaboration agreements. We also obtained $60.9 million in net proceeds from our initial public offering of our Class A common stock. We have not generated any revenue from the sale of any products. As of September 30, 2016, we had available cash and cash equivalents of approximately $95.7 million. Our cash and cash equivalents are invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.

Cash Flows

The following table sets forth the primary sources and uses of cash for each of the nine months ended September 30 set forth below:

	2016			2015
	(unaudited)
	(in thousands)
Net cash (used in) provided by:
Operating activities	$	(8,123	)	$	(32,077	)
Investing activities		(281	)		(257	)
Financing activities		62,056			(373	)
Net change in cash and cash equivalents	$	53,652		$	(32,707	)

Operating Activities

Net cash used in operating activities was $8.1 million for the nine months ended September 30, 2016, consisting primarily of net loss of $2.1 million adjusted for non-cash items including stock-based compensation expense of $1.5 million, depreciation expense of $0.5 million, and a net decrease in operating assets and liabilities of $8.0 million. The significant items in the change in operating assets and liabilities include an increase of prepaid expenses and other current assets of $2.9 million due to clinical trial prepayments and reimbursements due from KHK and AbbVie, a decrease in income tax receivable of $31.9 million due to tax refunds received, and a decrease in deferred revenue of $37.2 million. The decrease in deferred revenue relates to the timing of upfront payments and ratable recognition of revenue over the expected term of the performance obligations under our collaboration agreements with AbbVie and KHK, resulting in recognition of $37.2 million of license and milestone revenue.

Net cash used in operating activities was $32.1 million for the nine months ended September 30, 2015, consisting primarily of net income of $0.3 million adjusted for non-cash items including stock-based compensation expense of $1.0 million, depreciation expense of $1.5 million, decrease in provision for deferred taxes of $13.4 million, and net decrease in operating assets and liabilities of $48.3 million. The significant items in the change in operating assets and liabilities include an increase in accrued direct research and other current liabilities of $1.6 million due clinical trial activities, an increase in income tax receivable of $13.5 million due to carrying back 2015 losses to realize tax benefits, and a decrease in deferred revenue of $37.1 million. The decrease in deferred revenue relates to the timing of upfront payments and ratable recognition of revenue over the expected term of the performance obligations under our collaboration agreements with AbbVie and KHK, resulting in recognition of $37.1 million of license and milestone revenue.

Investing Activities

Net cash used in investing activities consisted of purchases and sales of property and equipment. Net cash used in investing activities for the nine months ended September 30, 2016 and 2015 was not significant.

Financing Activities

Net cash provided by financing activities was $62.1 million, primarily due to net proceeds of $62.2 million from the close of our initial public offering for the nine months ended September 30, 2016. Net cash used in financing activities for the nine months ended September 30, 2015 was not significant.

Operating 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, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. We expect 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.

We believe our existing cash and cash equivalents will be sufficient to enable us to fund our existing operating expenses from ongoing clinical trials and preclinical programs and capital expenditures through mid-2018. Our longer term liquidity requirements will require us to raise additional capital, such as through additional equity or debt financings. Our future capital requirements will depend on many factors, including the receipt of milestones under our current collaboration agreements and the timing of our expenditures related to existing and future clinical trials.

In addition, we may require additional capital in the shorter term for the further development of our existing product candidates and may also need to raise additional funds in the shorter term to pursue other development activities related to additional product candidates.

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. 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, 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. Any of these events could significantly harm our business, financial condition, and prospects.

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 that we pursue;

•

the costs of development efforts for our product candidates that are not subject to reimbursement from our collaborators;

•

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

•

the continuation of our existing collaborations and entry into new collaborations and the receipt of any collaboration payments;

•

the time and unreimbursed costs necessary to commercialize products in territories in which our product candidates are approved for sale;

•

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

•

the level of reimbursement or third-party payor pricing available to 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 being a public company; and

•

the costs we incur in the filing, prosecution, maintenance, and defense of our extensive patent portfolio and other intellectual property rights.

If we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, financial condition, and results of operations could be materially adversely affected.

Contractual Obligations and Commitments

Contractual Obligations

As of September 30, 2016, our contractual obligations were as follows:

	Payments due by period
	Less than 1 year		1 to 3 years		Total
	(in thousands)
Operating lease obligations	$	592	$	660	$	1,252
Capital lease obligations		45		—		45
Total contractual obligations	$	637	$	660	$	1,297

Clinical Trials

As of September 30, 2016, 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. generally accepted accounting principles. 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. There have been no significant and material changes in our critical accounting policies during the nine months ended September 30, 2016, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Significant Judgments and Estimates” in our Final Prospectus.

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

We are an “emerging growth company,” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as public companies that are not emerging growth companies.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) , which supersedes the leases in ASC 840, Leases . This ASU requires the recognition of lease assets and lease liabilities by lessees for those leases previously classified as operating leases. The ASU is effective for public companies for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. We will apply the guidance and disclosure provisions of the new standard upon adoption.

In March 2016, the FASB issued ASU No. 2016-09, Compensation–Stock Compensation: Improvements to Employee Share-Based Payment Accounting , to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The ASU is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. We will apply the guidance and disclosure provisions of the new standard upon adoption.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The ASU is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company is currently evaluating this standard and has not yet determined what, if any, effect ASU No. 2016-09 will have on its consolidated results of operations or financial position.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks in the ordinary course of our business. These market risks are principally limited to interest rate fluctuations. We had cash and cash equivalents of $95.7 million at September 30, 2016, consisting primarily of funds in operating cash accounts. The primary objective of our investment activities is to preserve principal and liquidity while maximizing income without significantly increasing risk. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of our investment portfolio, we do not believe an immediate 1.0% increase in interest rates would have a material effect on the fair market value of our portfolio, and accordingly we do not expect a sudden change in market interest rates to materially affect our operating results or cash flows.

We contract with research organizations and investigational sites globally. Generally, these contracts are denominated in U.S. dollars. However, we may be subject to fluctuations in foreign currency rates in connection with agreements not denominated in U.S. dollars. We do not hedge our foreign currency exchange rate risk. We do not expect a sudden change in foreign exchange rates to materially affect our operating results or cash flows.

Item 4. Cont rols and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2016. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2016, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended September 30, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHE R INFORMATION

Item 1. Legal Proceedings.

We are not currently subject to any material legal proceedings.

Item 1A. Risk Factors.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors and other cautionary statements described under the heading “Risk Factors” included in our Final Prospectus, which could materially affect our businesses, financial condition, or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, or future results. There has been no material changes in our risk factors from those described in the Final Prospectus.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities

None.

Use of Proceeds from Initial Public Offering of Class A Common Stock

On May 25, 2016, our registration statement on Form S-1 (File No. 333-208843) relating to our initial public offering, or IPO, of our Class A common stock was declared effective by the SEC. The shares began trading on The NASDAQ Global Market on May 26, 2016. The public offering price of the shares sold in the offering was $11.00 per share. The IPO closed on June 1, 2016 and included 6,325,000 shares of Class A common stock, which included 825,000 shares of Class A common stock issued pursuant to the over-allotment option granted to the underwriters, for gross proceeds of approximately $69.6 million before deducting underwriters’ discounts and commissions and offering-related expenses. Net proceeds, after deducting underwriting discounts and commissions of $4.9 million and offering expenses of approximately $3.8 million, were $60.9 million. Citigroup Global Markets Inc., Cowen and Company, LLC, and Piper Jaffray & Co. acted as joint book-running managers of this offering.

There has been no material change in the planned use of proceeds from our IPO as described in our prospectus dated May 25, 2016, filed with the SEC pursuant to Rule 424(b)(4) of the Securities Act. We invested the funds received in highly liquid money market funds. The net proceeds from the IPO have been used and will be used, together with our cash and cash equivalents, to fund continued advancement of our bardoxolone methyl, omaveloxolone, and clinical trials and preclinical studies, and to provide funds for working capital and other general purposes. None of the offering proceeds were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning 10.0% or more of any class of our equity securities or to any other affiliates.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. E xhibits.

Exhibit Number		Description

3.1		Thirteenth Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.7 to the Registrant’s Registration Statement on Form S-1, File No. 333-208803, filed with the Commission on May 16, 2016).

3.2		Amended and Restated Bylaws (incorporated by reference to Exhibit 3.4 to the Registrant’s Registration Statement on Form S-1, File No. 333-208843, filed with the Commission on February 8, 2016).

10.1+*		Indemnification Agreement by and between the Registrant and Dawn C. Bir dated September 6, 2016.

10.2+*		Employment Agreement by and between the Registrant and Jason D. Wilson dated September 23, 2015.

10.3+*		Employment Agreement by and between the Registrant and Michael D. Wortley dated September 23, 2015.

10.4+*		Employment Agreement by and between the Registrant and Dawn C. Bir dated September 6, 2016.

31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

+	Indicates management contract or compensatory plan.

*	Filed herewith.

SIGNAT URES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 14, 2016

	By:	/s/ J. Warren Huff
	Name:	J. Warren Huff
	Title:	Chief Executive Officer and President

Exhibit 10.1

REATA PHARMACEUTICALS, INC.

INDEMNIFICATION AGREEMENT

This Agreement (“Agreement”) is made and entered into as of the 6th day of September, 2016, by and between Reata Pharmaceuticals, a Delaware corporation (the “Company”), and Dawn Carter Bir (“Indemnitee”).

RECITALS

A. Highly competent and experienced persons are reluctant to serve corporations as directors, executive officers or in other capacities unless they are provided with adequate protection through insurance and indemnification against claims and actions against them arising out of their service to and activities on behalf of the Company.

B. The Board of Directors of the Company (the “Board”) has determined that the inability to attract and retain such persons would be detrimental to the best interests of the Company and its stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future.

C. The Board has also determined that it is reasonable, prudent and necessary for the Company, in addition to purchasing and maintaining directors’ and officers’ liability insurance (or otherwise providing for adequate arrangements of self-insurance), contractually to obligate itself to indemnify such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be adequately protected.

D. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company, but only on the condition that Indemnitee be so indemnified to the fullest extent permitted by law, as permitted herein.

E. Article Thirteen of the Amended and Restated Certificate of Incorporation of the Company provides for indemnification of directors and officers to the fullest extent permitted by law.

In consideration of the foregoing and the mutual covenants herein contained, and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereby agree as follows:

ARTICLE I

Certain Definitions

As used herein, the following words and terms shall have the following respective meanings (whether singular or plural):

“Acquiring Person” means any Person other than (i) the Company, (ii) any of the Company’s Subsidiaries, (iii) any employee benefit plan of the Company or of a Subsidiary of the Company or of a Company owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, or (iv) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of a Subsidiary of the Company or of a Company owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

“Change in Control” means the occurrence of any of the following events:

(i) The acquisition, after the date of this Agreement, by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or more of either (x) the then outstanding shares of Common Stock of the Company (the “Outstanding Company Common Stock”) or (y) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this Subparagraph (i), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of paragraph (iii) below; or

(ii) Members of the Incumbent Board cease for any reason to constitute at least a majority of the Board; or

(iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or an acquisition of assets of another entity (a “Business Combination”), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common equity and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors or other similar governing body, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either

directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Company or the entity resulting from such Business Combination) beneficially owns, directly or indirectly, 40% or more of, respectively, the then outstanding shares of common equity of the entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such entity except to the extent that such ownership results solely from ownership of the Company that existed prior to the Business Combination and (C) at least a majority of the members of the board of directors or other similar governing body of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

(iv) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

“Claim” means an actual or threatened claim or request for relief which was, is or may be made by reason of anything done or not done by Indemnitee in, or by reason of any event or occurrence related to, Indemnitee’s Corporate Status, including any threatened, pending or completed action, suit, arbitration, investigation, inquiry, alternate dispute resolution mechanism, administrative or legislative hearing, or any other proceeding (including, without limitation, any securities laws action, suit, arbitration, alternative dispute resolution mechanism, hearing, or procedure) whether civil, criminal, administrative, arbitrative or investigative and whether or not based upon events occurring, or actions taken, before the date hereof, and any appeal in or related to any such action, suit, arbitration, investigation, hearing or procedure and any inquiry or investigation (including discovery), whether conducted by or in the right of the Company or any other Person, that Indemnitee in good faith believes could lead to any such action, suit, arbitration, alternative dispute resolution mechanism, hearing or other proceeding or appeal thereof.

“Corporate Status” means the status of a person who is, becomes or was a director, officer, employee, agent or fiduciary of the Company or is, becomes or was serving at the request of the Company as a director, officer, partner, member, venturer, proprietor, trustee, employee, agent, fiduciary or similar functionary of another foreign or domestic corporation, partnership, limited liability company, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise. For purposes of this Agreement, the Company agrees that Indemnitee’s service on behalf of or with respect to any Subsidiary of the Company shall be deemed to be at the request of the Company.

“DGCL” means the Delaware General Corporation Law and any successor statute thereto, as either of them may from time to time be amended.

“Disinterested Director” with respect to any request by Indemnitee for indemnification hereunder, means a director of the Company who at the time of the vote is not a named defendant or respondent in the Claim in respect of which indemnification is sought by Indemnitee.

“Exchange Act” means the Securities Exchange Act of 1934.

“Expenses” means all attorneys’ fees and disbursements, retainers, accountant’s fees and disbursements, private investigator fees and disbursements, court costs, transcript costs, fees and expenses of experts, witness fees and expenses, costs and obligations under any bond posted in connection with any Claim, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements, costs or expenses of the types customarily incurred in connection with prosecuting, defending (including affirmative defenses and counterclaims), preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in or preparing to participate in (including on appeal) a Claim and all interest or finance charges attributable to any thereof. Should any payments by the Company under this Agreement be determined to be subject to any federal, state or local income or excise tax, “Expenses” shall also include such amounts as are necessary to place Indemnitee in the same after-tax position (after giving effect to all applicable taxes) as Indemnitee would have been in had no such tax been determined to apply to such payments. Also, in this Agreement “witness” includes responding (or objecting) to a discovery request, whether in writing or in an oral deposition, in any Claim.

“Final Adjudication” means a final adjudication by a court from which there is no further right of appeal or a final adjudication of an arbitration pursuant to Section 5.1 if Indemnitee elects to seek such arbitration.

“Incumbent Board” means the individuals who, as of the date of this Agreement, constitute the Board and any other individual who becomes a director of the Company after that date and whose election or appointment by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Incumbent Board.

“Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither contemporaneously is, nor in the five years theretofore has been, retained to represent: (a) the Company, any subsidiary of the Company, or Indemnitee in any matter material to either such Person (other than as Independent Counsel under this Agreement or similar agreements), (b) any other party to the Claim giving rise to a claim for indemnification hereunder or (c) the beneficial owner, directly or indirectly, of securities of the Company representing 5% or more of the combined voting power of the Company’s then outstanding voting securities, or Person controlled by such beneficial owner (other than, in each such case under clauses (a) through (c)), with respect to matters concerning the rights of Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements). Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

“Independent Directors” means the directors on the Board that are independent directors as defined in NASDAQ Marketplace Rule 4200(a)(15) or successor provision, or, if the Company’s Common Stock is not then quoted on the NASDAQ Global Select Market, that qualify as independent, disinterested, or a similar term as defined in the rules of the principal securities exchange or inter-dealer quotation system on which the Company’s Common Stock is then listed or quoted.

“Person” means any individual, entity or group (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act).

“Potential Change in Control” shall be deemed to have occurred if (i) any Person shall have announced publicly an intention to effect a Change in Control, or commenced any action (such as the commencement of a tender offer for the Company’s Outstanding Company Common Stock or Outstanding Company Voting Securities or the solicitation of proxies for the election of any of the Company’s directors) that, if successful, could reasonably be expected to result in the occurrence of a Change in Control; (ii) the Company enters into an agreement, the consummation of which would constitute a Change in Control; or (iii) any other event occurs which the Board declares to be a Potential Change of Control.

“Subsidiary” means, with respect to any Person, any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by that Person.

“Voting Securities” means any securities that vote generally in the election of directors, in the admission of general partners, or in the selection of any other similar governing body.

ARTICLE II

Services by Indemnitee

Indemnitee is serving as an officer of the Company. Indemnitee may from time to time also agree to serve, as the Company may request from time to time, in another capacity for the Company (including another officer or director position) or as a director, officer, partner, member, venturer, proprietor, trustee, employee, agent, fiduciary or similar functionary of another foreign or domestic corporation, partnership, joint venture, limited liability company, sole proprietorship, trust, employee benefit plan or other enterprise. Indemnitee and the Company each acknowledge that they have entered into this Agreement as a means of inducing Indemnitee to serve, or continue to serve, the Company in such capacities. Indemnitee may at any time and for any reason resign from such position or positions (subject to any other contractual obligation or any obligation imposed by operation of law). The Company shall have no obligation under this Agreement to continue Indemnitee in any such position or positions.

ARTICLE III

Indemnification

Section 3.1 General . Subject to the provisions set forth in Article IV, the Company shall indemnify, and advance Expenses to, Indemnitee to the fullest extent permitted by applicable law in effect on the date hereof and to such greater extent as applicable law may hereafter from time to time permit. The other provisions set forth in this Agreement are provided in addition to and

as a means of furtherance and implementation of, and not in limitation of, the obligations expressed in this Article III. No requirement, condition to or limitation of any right to indemnification or to advancement of Expenses under this Article III shall in any way limit the rights of Indemnitee under Article VII.

Section 3.2 Additional Indemnity of the Company . Indemnitee shall be entitled to indemnification pursuant to this Section 3.2 if, by reason of anything done or not done by Indemnitee in, or by reason of any event or occurrence related to, Indemnitee’s Corporate Status, Indemnitee is, was or becomes, or is threatened to be made, a party to, or witness or other participant in any Claim. Pursuant to this Section 3.2, Indemnitee shall be indemnified against any and all Expenses, judgments, penalties (including excise or similar taxes), fines and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of any such Expenses, judgments, penalties, fines and amounts paid in settlement) actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Claim, issue or matter therein. Notwithstanding the foregoing, the obligations of the Company under this Section 3.2 shall be subject to the condition that no determination (which, in any case in which Independent Counsel is involved, shall be in a form of a written opinion) shall have been made pursuant to Article IV that Indemnitee would not be permitted to be indemnified under applicable law. Nothing in this Section 3.2 shall limit the benefits of Section 3.1, Section 3.3 or any other Section hereunder.

Section 3.3 Advancement of Expenses . The Company shall pay, on a current and as-incurred basis, all Expenses reasonably incurred by, or in the case of retainers to be incurred by, or on behalf of Indemnitee (or, if applicable, reimburse Indemnitee for any and all Expenses reasonably incurred by Indemnitee and previously paid by Indemnitee) in connection with any Claim, whether brought by the Company or otherwise, in advance of the later of (a) the final, non-appealable determination or resolution of all such Claims and (b) any determination respecting entitlement to indemnification pursuant to Article IV hereof (and shall continue to pay such Expenses after such determination and until it shall ultimately be determined (in a Final Adjudication) that Indemnitee is not entitled to be indemnified by the Company against such Expenses). Such payments and advances shall be made within 10 days after the receipt by the Company of a written request from Indemnitee requesting such payment or payments from time to time, whether prior to or after the final, non-appealable determination or resolution of such Claim. Any such payment by the Company is referred to in this Agreement as an “Expense Advance.” Any dispute as to the reasonableness of the incurrence of any Expense shall not delay an Expense Advance by the Company, and the Company agrees that any such dispute shall be resolved only upon the final, non-appealable determination or resolution of the respective underlying Claim involving Indemnitee. Indemnitee hereby undertakes and agrees that Indemnitee will reimburse and repay the Company without interest for any Expense Advances to the extent that it shall ultimately be determined (in a Final Adjudication) that Indemnitee is not entitled under the law to be indemnified by the Company against such Expenses. Indemnitee shall not be required to provide collateral or otherwise secure the undertaking and agreement described in the prior sentence. The Company shall make all Expense Advances pursuant to this Section 3.3 without regard to the financial ability of the Indemnitee to make repayment and without regard to whether or not the Indemnitee may ultimately be found to be entitled to indemnification under the provisions of this Agreement.

Section 3.4 Indemnification for Additional Expenses . The Company shall indemnify Indemnitee against any and all costs and expenses (of the types described in the definition of Expenses in Article I) and, if requested by Indemnitee, shall (within two business days of that request) advance those costs and expenses to Indemnitee, that are incurred by Indemnitee in connection with any claim asserted against, or action brought by, Indemnitee for (i) indemnification or an Expense Advance by the Company under this Agreement or any other agreement or provision of the Company’s Certificate of Incorporation or Bylaws now or hereafter in effect relating to any Claim, (ii) recovery under any directors’ and officers’ liability insurance policies maintained by the Company, or (iii) enforcement of, or claims for breaches of, any provision of this Agreement, in each of the foregoing situations regardless of whether Indemnitee ultimately is determined to be entitled to that indemnification, Expense Advance payment, insurance recovery, enforcement, or damage claim, as the case may be, and regardless of whether the nature of the proceeding with respect to such matters is judicial, by arbitration, or otherwise.

Section 3.5 Partial Indemnity . If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, judgments, fines, penalties, and amounts paid in settlement of a Claim but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Claims, or in defense of any issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection therewith.

ARTICLE IV

Procedure for Determination of Entitlement to Indemnification

Section 4.1 Request by Indemnitee . To obtain indemnification under this Agreement, Indemnitee shall, at such time as determined by Indemnitee in Indemnitee’s sole discretion, submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary or an Assistant Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification. Nevertheless, any failure of Indemnitee to provide a request to the Company, or to provide such a requestwithin any time frame, shall not relieve the Company of any liability that it may have to Indemnitee hereunder.

Section 4.2 Determination of Request . Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 4.1 hereof, a determination, if required by applicable law, with respect to whether Indemnitee is permitted under applicable law to be indemnified shall be made in accordance with the terms of Section 4.5, in the specific case as set forth in this Section 4.2:

(a) If a Potential Change in Control or a Change in Control shall have occurred, by Independent Counsel (selected in accordance with Section 4.3) in a written opinion to the Board and Indemnitee, unless Indemnitee shall request that such determination be made by the Board, or a committee of the Board, in which case by the person or persons or in the manner provided for in clause (i) or (ii) of paragraph (b) below; or

(b) If a Potential Change in Control or a Change in Control shall not have occurred, then the determination shall be made by one of the following, in Indemnitee’s sole discretion, as the Indemnitee requests in writing: (i) by the Board by a majority vote of the Disinterested Directors even though less than a quorum of the Board, or (ii) by a majority vote of a committee solely of two or more Disinterested Directors designated to act in the matter by a majority vote of all Disinterested Directors even though less than a quorum of the Board, or (iii) by Independent Counsel selected by the Board or a committee of the Board by a vote as set forth in clauses (i) or (ii) of this paragraph (b), or if such vote is not obtainable or such a committee cannot be established, by a majority vote of all directors, or (iv) by the stockholders of the Company in a vote that excludes the shares held by directors who are not Disinterested Directors.

If it is so determined that Indemnitee is permitted to be indemnified under applicable law, payment to Indemnitee shall be made within 10 days after such determination. Nothing contained in this Agreement shall require that any determination be made under this Section 4.2 prior to the final, non-appealable determination or resolution of a Claim involving Indemnitee for which indemnification is sought hereunder; provided, that Expense Advances shall continue to be made by the Company pursuant to, and to the extent required by, the provisions of Article III. Indemnitee shall cooperate with the person or persons making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person upon reasonable advance request any documentation or information that is not privileged or otherwise protected from disclosure and that is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person or persons making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification), and the Company shall indemnify and hold harmless Indemnitee therefrom.

Section 4.3 Independent Counsel . If the determination of entitlement to indemnification is to be made by Independent Counsel, the Independent Counsel shall be selected by Indemnitee, and Indemnitee shall give written notice to the Company, within 10 days after submission of Indemnitee’s request for indemnification, specifying the identity and address of the Independent Counsel so selected unless Indemnitee shall request that such selection be made by the Disinterested Directors or a committee of the Board, in which event the Company shall give written notice to Indemnitee within 10 days after receipt of Indemnitee’s request for the Board or a committee of the Disinterested Directors to make such selection, specifying the identity and

address of the Independent Counsel so selected. In either event, (i) such notice to Indemnitee or the Company, as the case may be, shall be accompanied by a written confirmation by the Independent Counsel so selected that it satisfies the requirements of the definition of “Independent Counsel” in Article I and that it agrees to serve in such capacity and (ii) Indemnitee or the Company, as the case may be, may, within seven days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection. Any objection to the selection of Independent Counsel pursuant to this Section 4.3 may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of the definition of “Independent Counsel” in Article I, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is timely made, the Independent Counsel so selected may not serve as Independent Counsel unless and until a court of competent jurisdiction (the “Court”) has determined that such objection is without merit or such objection is withdrawn. In the event of a timely written objection to a choice of Independent Counsel, the party originally selecting the Independent Counsel shall have seven days to make an alternate selection of Independent Counsel and to give written notice of such selection to the other party, after which time such other party shall have five days to make a written objection to such alternate selection. If, within 30 days after submission of Indemnitee’s request for indemnification pursuant to Section 4.1, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Court for resolution of any objection that shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom an objection is so resolved or the person so appointed shall act as Independent Counsel under Section 4.2. The Company shall pay any and all fees and expenses reasonably incurred by, such Independent Counsel in connection with acting pursuant to Section 4.2, and the Company shall pay all fees and expenses reasonably incurred incident to the procedures of this Section 4.3, regardless of the manner in which such Independent Counsel was selected or appointed. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 5.1, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

Section 4.4 Establishment of a Trust . In the event of a Potential Change in Control or a Change in Control, the Company shall, upon written request by Indemnitee, create a trust for the benefit of Indemnitee (the “Trust”) and from time to time upon written request of Indemnitee shall fund the Trust in an amount sufficient to satisfy any and all Expenses reasonably anticipated at the time of each such request to be incurred in connection with investigating, preparing for, and defending any Claim, and any and all judgments, fines, penalties, and settlement amounts of any and all Claims from time to time actually paid or claimed, reasonably anticipated, or proposed to be paid. The amount to be deposited in the Trust pursuant to the foregoing funding obligation shall be determined by the Independent Counsel (or other person(s) making the determination of whether Indemnitee is permitted to be indemnified by applicable law). The terms of the Trust shall provide that, upon a Change in Control, (i) the Trust shall not be revoked or the principal thereof invaded, without the written consent of Indemnitee; (ii) the trustee of the Trust shall advance to Indemnitee, within ten days of a request by Indemnitee, any and all Expenses reasonably incurred by, or in case of retainer to be incurred by, or on behalf of Indemnitee (or, if applicable, reimburse Indemnitee for any Expense reasonably incurred by

Indemnitee and previously paid by Indemnitee), with any required determination concerning the reasonableness of the Expenses to be made by the Independent Counsel (and Indemnitee hereby agrees to reimburse the Trust under the circumstances in which Indemnitee would be required to reimburse the Company for Expense Advances under Section 3.3 of this Agreement); (iii) the Trust shall continue to be funded by the Company in accordance with the funding obligation set forth above; (iv) the trustee of the Trust shall promptly pay to Indemnitee all amounts for which Indemnitee shall be entitled to indemnification pursuant to this Agreement; and (v) all unexpended funds in the Trust shall revert to the Company upon a final determination by the Independent Counsel or a Final Adjudication, as the case may be, that Indemnitee has been fully indemnified under the terms of this Agreement. The trustee of the Trust shall be chosen by Indemnitee and shall be an institution that is not affiliated with Indemnitee. Nothing in this Section 4.4 shall relieve the Company of any of its obligations under this Agreement.

Section 4.5 Presumptions and Effect of Certain Proceedings .

(a) Indemnitee shall be presumed to be entitled to indemnification under this Agreement upon submission of a request for indemnification under Section 4.1, and the Company shall have the burden of proof in overcoming that presumption in reaching a determination contrary to that presumption. Such presumption shall be used by Independent Counsel (or other person or persons determining entitlement to indemnification) as a basis for a determination of entitlement to indemnification unless the Company provides information sufficient to overcome such presumption by clear and convincing evidence or unless the investigation, review and analysis of Independent Counsel (or such other person or persons) convinces Independent Counsel by clear and convincing evidence that the presumption should not apply.

(b) If the person or persons empowered or selected under Article IV of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within 60 days after receipt by the Company of the request by Indemnitee therefor, the determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating to such determination; and provided, further, that the 60-day limitation set forth in this Section 4.5(b) shall not apply and such period shall be extended as necessary (i) if within 30 days after receipt by the Company of the request for indemnification under Section 4.1 Indemnitee and the Company have agreed, and the Board has resolved, to submit such determination to the stockholders of the Company pursuant to Section 4.2(b) for their consideration at an annual meeting of stockholders to be held within 90 days after such agreement and such determination is made thereat, or a special meeting of stockholders is called within 30 days after such receipt for the purpose of making such determination, such meeting is held for such purpose within 60 days after having been so called and such determination is made thereat, or (ii) if the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 4.2(a) of this Agreement, in which case the applicable period shall be as set forth in Section 5.1(c).

(c) The termination of any Claim, issue or matter by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) by itself adversely affect the rights of Indemnitee to indemnification or create a presumption that Indemnitee failed to meet any particular standard of conduct, that Indemnitee had any particular belief, or that a court has determined that indemnification is not permitted by applicable law. Indemnitee may be found to have failed to meet any particular standard of conduct in respect of any Claim, issue or matter only after Indemnitee shall have been so adjudged by the Court or arbitrator, as applicable, after exhaustion of all appeals therefrom.

(d) For purposes of the second sentence of Section 3.5, a settlement or other resolution of a Claim short of final judgment may be successful if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. For purposes of the second sentence of Section 3.5, in the event that any Claim to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including settlement of such Claim with or without payment of money or other consideration), it shall be presumed that Indemnitee has been successful on the merits or otherwise in suchClaim. Anyone seeking to overcome this presumption shall have the burden of proof by clear and convincing evidence.

(e) The failure of the Company (including by its directors or Independent Counsel) to have made a determination before the commencement of any action pursuant to this Agreement that indemnification is proper because Indemnitee has met the applicable standard of conduct shall not be a defense to the action or create a presumption that Indemnitee has not met the standard of conduct.

ARTICLE V

Certain Remedies of Indemnitee

Section 5.1 Indemnitee Entitled to Adjudication in an Appropriate Court . If (a) a determination is made pursuant to Article IV that Indemnitee is not entitled to indemnification under this Agreement; (b) there has been any failure by the Company to make timely payment or advancement of any amounts due hereunder (including, without limitation, any Expense Advances); or (c) the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 4.2 and such determination shall not have been made and delivered in a written opinion within 60 days after the latest of (i) such Independent Counsel’s being appointed, (ii) the overruling by the Court of objections to such counsel’s selection, or (iii) expiration of all periods for the Company or Indemnitee to object to such counsel’s selection, Indemnitee shall be entitled to commence an action seeking an adjudication in the Court of Indemnitee’s entitlement to such indemnification or advancements due hereunder, including, without limitation, Expense Advances. Alternatively, Indemnitee, in Indemnitee’s sole discretion, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the commercial arbitration rules of the American Arbitration Association. Indemnitee shall commence such action seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such action pursuant to this Section 5.1, or such right shall expire. The Company agrees not to oppose Indemnitee’s right

to seek any such adjudication or award in arbitration and it shall continue to pay Expense Advances pursuant to Section 3.3 until it shall ultimately be determined (in a Final Adjudication) that Indemnitee is not entitled to be indemnified by the Company against such Expenses.

Section 5.2 Adverse Determination Not to Affect any Judicial Proceeding . If a determination shall have been made pursuant to Article IV that Indemnitee is not entitled to indemnification under this Agreement, any judicial proceeding or arbitration commenced pursuant to this Article V shall be conducted in all respects as a de novo trial or arbitration on the merits, and Indemnitee shall not be prejudiced by reason of such initial adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Article V, Indemnitee shall be presumed to be entitled to indemnification or advancement of Expenses, as the case may be, under this Agreement and the Company shall have the burden of proof in overcoming such presumption and to show by clear and convincing evidence that Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

Section 5.3 Company Bound by Determination Favorable to Indemnitee in any Judicial Proceeding or Arbitration . If a determination shall have been made or deemed to have been made pursuant to Article IV that Indemnitee is entitled to indemnification, the Company shall be irrevocably bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Article V, and shall be precluded from asserting that such determination has not been made or that the procedure by which such determination was made is not valid, binding and enforceable.

Section 5.4 Company Bound by the Agreement . The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Article V that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. Without limiting the generality of the preceding sentence, the Company shall not seek from a court, or agree to, a “bar order” that would have the effect of prohibiting or limiting Indemnitee’s rights to advancement of any Expenses under this Agreement.

ARTICLE VI

Contribution

Section 6.1 Contribution Payment .

(a) Whether or not the indemnification provided in Article III hereof is available, in respect of any threatened, pending or completed action, suit or Claim in which the Company is jointly liable with Indemnitee (or would be if joined in such action, or Claim), the Company shall pay, in the first instance, the entire amount of any judgment or settlement of such action, suit or Claim without requiring Indemnitee to contribute to such payment, and the Company hereby waives and relinquishes any right of contribution it may have against Indemnitee. The Company shall not enter into any settlement of any action, suit or Claim in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit orClaim) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.

(b) Without diminishing or impairing the obligations of the Company set forth in the preceding subparagraph, if, for any reason, Indemnitee shall elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending or completed action, suit or Claim in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit orClaim), the Company shall contribute to the amount of Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in proportion to the relative benefits received by the Company and all officers, directors or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit orClaim), on the one hand, and Indemnitee, on the other hand, from the transaction or events from which such action, suit or Claim arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by reference to the relative fault of the Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit orClaim), on the one hand, and Indemnitee, on the other hand, in connection with the transaction or events that resulted in such Expenses, judgments, fines or settlement amounts, as well as any other equitable considerations which applicable law may require to be considered.

(c) The Company hereby agrees, to the fullest extent permitted by applicable law, to fully indemnify and hold Indemnitee harmless from any claims of contribution which may be brought by officers, directors or employees of the Company, other than Indemnitee, who may be jointly liable with Indemnitee.

(d) To the fullest extent permissible under applicable law and without diminishing or impairing the obligations of the Company set forth in the preceding subparagraphs of this Section 6.1, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Claim in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to suchClaim; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

Section 6.2 Relative Fault . The relative fault of the Indemnitee, on the one hand, and of the Company and any and all other parties (including officers and directors of the Company other than Indemnitee) who may be at fault with respect to such matter shall be determined (i) by reference to the relative fault of Indemnitee as determined by the court or other governmental agency assessing the contribution amounts or (ii) to the extent such court or other governmental agency does not apportion relative fault, by the Independent Counsel (or such other party which makes a determination under Article IV) after giving effect to, among other things, the degree of which their actions were motivated by intent to gain personal profit or advantage, the degree to

which their liability is primary or secondary, the degree to which their conduct is active or passive, the degree of the knowledge, access to information, and opportunity to prevent or correct the subject matter of the Claims and other relevant equitable considerations of each party. The Company and Indemnitee agree that it would not be just and equitable if contribution pursuant to this Section 6.2 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 6.2.

ARTICLE VII

Miscellaneous

Section 7.1 Non-Exclusivity . The rights of Indemnitee to receive indemnification and advancement of Expenses under this Agreement shall be in addition to, and shall not be deemed exclusive of, any other rights Indemnitee shall under the DGCL or other applicable law, the charter or bylaws of the Company, any other agreement, vote of stockholders or a resolution of directors, or otherwise. Every other right or remedy of Indemnitee shall be cumulative of the rights and remedies granted Indemnitee hereunder. No amendment or alteration of the charter or bylaws of the Company or any provision thereof shall adversely affect Indemnitee’s rights hereunder, and such rights shall be in addition to any rights Indemnitee may have under the charter, bylaws and the DGCL or other applicable law. To the extent that there is a change in the DGCL or other applicable law (whether by statute or judicial decision) that allows greater indemnification by agreement than would be afforded currently under the Company’s charter or bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by virtue of this Agreement the greater benefit so afforded by such change. Any amendment, alteration or repeal of the DGCL that adversely affects any right of Indemnitee shall be prospective only and shall not limit or eliminate any such right with respect to any Claim involving any occurrence or alleged occurrence of any action or omission to act that took place before the effective date of such amendment or repeal.

Section 7.2 Insurance and Subrogation .

(a) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, agents or fiduciaries of the Company or for individuals serving at the request of the Company as directors, officers, partners, members, venturers, proprietors, trustees, employees, agents, fiduciaries or similar functionaries of another foreign or domestic corporation, partnership, limited liability company, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee, agent or fiduciary under such policy or policies.

(b) In the event of any payment by the Company under this Agreement for which reimbursement is available under any insurance policy or policies obtained by the Company, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee under such insurance policy or policies, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights, provided that all Expenses relating to such action shall be borne by the Company.

(c) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under the Company’s charter or bylaws or any insurance policy, contract, agreement or otherwise.

(d) If Indemnitee is a director of the Company, the Company will advise the Board of any proposed material reduction in the coverage for Indemnitee to be provided by the Company’s directors’ and officers’ liability insurance policy and will not effect such a reduction with respect to Indemnitee without the prior approval of at least 80% of the Independent Directors of the Company.

(e) If Indemnitee is a director of the Company during the term of this Agreement and if Indemnitee ceases to be a director of the Company for any reason, the Company shall procure a run-off directors’ and officers’ liability insurance policy with respect to claims arising from facts or events that occurred before the time Indemnitee ceased to be a director of the Company and covering Indemnitee, which policy, without any lapse in coverage, will provide coverage for a period of six years after the time Indemnitee ceased to be a director of the Company and will provide coverage (including amount and type of coverage and size of deductibles) that are substantially comparable to the Company’s directors’ and officers’ liability insurance policy that was most protective of Indemnitee in the 12 months preceding the time Indemnitee ceased to be a director of the Company and that is reasonably satisfactory to Indemnitee; provided, however, that:

(i) this obligation shall be suspended during the period immediately following the time Indemnitee ceases to be a director of the Company if and only so long as the Company has a directors’ and officers’ liability insurance policy in effect covering Indemnitee for such claims that, if it were a run-off policy, would meet or exceed the foregoing standards, but in any event this suspension period shall end when a Change in Control occurs; and

(ii) no later than the end of the suspension period provided in the preceding clause (i) (whether because of failure to have a policy meeting the foregoing standards or because a Change in Control occurs), the Company shall procure a run-off directors’ and officers’ liability insurance policy meeting the foregoing standards and lasting for the remainder of the six-year period.

(f) Notwithstanding the preceding clause (e) including the suspension provisions therein, if Indemnitee ceases to be an officer or a director of the Company in connection with a Change in Control or at or during the one-year period following the occurrence of a Change in Control, the Company shall procure a run-off directors’ and officers’ liability insurance policy covering Indemnitee that is reasonably satisfactory to Indemnity, meets the foregoing standards in clause (e), and lasts for a six-year period upon the Indemnitee’s ceasing to be an officer or a director of the Company in such circumstances.

(g) If at the time of the receipt of a notice of a Claim pursuant to the terms hereof, the Company has directors’ and officers’ liability insurance in effect, the Company shall give prompt notice of the commencement of such Claim to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Claim in accordance with the terms of such policies.

Section 7.3 Self Insurance of the Company; Other Arrangements . The parties hereto recognize that the Company may, but except as provided in Section 7.2(d), Section 7.2(e), and Section 7.2(f) is not required to, procure or maintain insurance or other similar arrangements, at its expense, to protect itself and any person, including Indemnitee, who is or was a director, officer, employee, agent or fiduciary of the Company or who is or was serving at the request of the Company as a director, officer, partner, member, venturer, proprietor, trustee, employee, agent, fiduciary or similar functionary of another foreign or domestic corporation, partnership, limited liability company, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise against any expense, liability or loss asserted against or incurred by such person, in such a capacity or arising out of the person’s status as such a person, whether or not the Company would have the power to indemnify such person against such expense or liability or loss.

Except as provided in Section 7.2(d), Section 7.2(e) and Section 7.2(f), in considering the cost and availability of such insurance, the Company (through the exercise of the business judgment of its directors and officers) may, from time to time, purchase insurance which provides for certain (i) deductibles, (ii) limits on payments required to be made by the insurer, or (iii) coverage which may not be as comprehensive as that previously included in insurance purchased by the Company or its predecessors. The purchase of insurance with deductibles, limits on payments and coverage exclusions, even if in the best interest of the Company, may not be in the best interest of Indemnitee. As to the Company, purchasing insurance with deductibles, limits on payments and coverage exclusions is similar to the Company’s practice of self-insurance in other areas. In order to protect Indemnitee who would otherwise be more fully or entirely covered under such policies, the Company shall, to the maximum extent permitted by applicable law, indemnify and hold Indemnitee harmless to the extent (i) of such deductibles, (ii) of amounts exceeding payments required to be made by an insurer, or (iii) of amounts that prior policies of directors’ and officers’ liability insurance held by the Company or its predecessors have provided for payment to Indemnitee, if by reason of Indemnitee’s Corporate Status Indemnitee is or is threatened to be made a party to anyClaim. The obligation of the Company in the preceding sentence shall be without regard to whether the Company would otherwise be required to indemnify such officer or director under the other provisions of this

Agreement, or under any law, agreement, vote of stockholders or directors or other arrangement. Without limiting the generality of any provision of this Agreement, the procedures in Article IV hereof shall, to the extent applicable, be used for determining entitlement to indemnification under this Section 7.3.

Section 7.4 Certain Settlement Provisions . The Company shall have no obligation to indemnify Indemnitee under this Agreement for amounts paid in settlement of a Claim without the Company’s prior written consent. The Company shall not settle any Claim in any manner that would impose any fine or other obligation on Indemnitee without Indemnitee’s prior written consent. Neither the Company nor Indemnitee shall unreasonably withhold their consent to any proposed settlement.

Section 7.5 Duration of Agreement . This Agreement shall continue for so long as Indemnitee serves as a director, officer, employee, agent or fiduciary of the Company or, at the request of the Company, as a director, officer, partner, member, venturer, proprietor, trustee, employee, agent, fiduciary or similar functionary of another foreign or domestic corporation, partnership, limited liability company, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise, and thereafter shall survive until and terminate upon the later to occur of: (a) the expiration of 20 years after the latest date that Indemnitee shall have ceased to serve in any such capacity; (b) the final non-appealable determination or resolution of all pending Claims in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Article IV relating thereto; or (c) the expiration of all statutes of limitation applicable to possible Claims arising out of Indemnitee’s Corporate Status.

Section 7.6 Notice by Each Party . Indemnitee shall promptly notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document or communication relating to any Claim for which Indemnitee may be entitled to indemnification or advancement of Expenses hereunder; provided, however, that any failure of Indemnitee to so notify the Company shall not adversely affect Indemnitee’s rights under this Agreement except to the extent the Company shall have been materially prejudiced as a direct result of such failure. The Company shall promptly notify Indemnitee in writing as to the pendency of any Claim that may involve a claim against Indemnitee for which Indemnitee may be entitled to indemnification or advancement of Expenses hereunder.

Section 7.7 Amendment . This Agreement may not be modified or amended except by a written instrument executed by or on behalf of each of the parties hereto.

Section 7.8 Waivers . The observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) by the party entitled to enforce such term only by a writing signed by the party against which such waiver is to be asserted. Unless otherwise expressly provided herein, no delay on the part of any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party hereto of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.

Section 7.9 Entire Agreement . This Agreement and the documents expressly referred to herein constitute the entire agreement between the parties hereto with respect to the matters covered hereby, and any other prior or contemporaneous oral or written understandings or agreements with respect to the matters covered hereby, including without limitation any prior indemnification agreements, are expressly superseded by this Agreement.

Section 7.10 Severability . If any provision of this Agreement (including any provision within a single section, paragraph or sentence), or the application of such provision to any Person or circumstance, shall be judicially declared to be invalid, unenforceable or void, such decision will not have the effect of invalidating or voiding the remainder of this Agreement or affect the application of such provision to other Persons or circumstances, it being the intent and agreement of the parties that this Agreement shall be deemed amended by modifying such provision to the extent necessary to render it valid, legal and enforceable while preserving its intent, or if such modification is not possible, by substituting therefor another provision that is valid, legal and enforceable and that achieves the same objective. Any such finding of invalidity or unenforceability shall not prevent the enforcement of such provision in any other jurisdiction to the maximum extent permitted by applicable law.

Section 7.11 Notices . All notices and other communications hereunder shall be in writing and shall be deemed given upon (a) transmitter’s confirmation of a receipt of a facsimile transmission if during normal business hours of the recipient, otherwise on the next business day, (b) confirmed delivery of a standard overnight courier or when delivered by hand or (c) the expiration of five business days after the date mailed by certified or registered mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice):

If to the Company, to it at:

Reata Pharmaceuticals, Inc.

2801 Gateway Drive

Suite 150

Irving, Texas 75063-2648

Attn: Corporate Secretary

Facsimile: 469-442-4740

If to Indemnitee, to Indemnitee at:

Dawn Carter Bir

4817 Rangewood Drive

Flower Mound, Texas 75028

or to such other address or to such other individuals as any party shall have last designated by notice to the other parties. All notices and other communications given to any party in accordance with the provisions of this Agreement shall be deemed to have been given when delivered or sent to the intended recipient thereof in accordance with and as provided in the provisions of this Section 7.11.

Section 7.12 Governing Law . This Agreement and the legal relations among the parties shall, to the fullest extent permitted by law, be governed by, and construed and enforced in accordance with , the laws of the State of Delaware without regard to its conflict of laws rule.

Section 7.13 Submission to Jurisdiction . The Company and Indemnitee hereby irrevocably and unconditionally (a) agree that any action or proceeding arising out of or in connection with this Agreement (other than an arbitration provided for in Section 5.1) shall be brought only in the Court of Chancery of the State of Delaware (the “Delaware Court”), and not in any other state or federal court in the United States of America or any court in any other country, (b) consent to submit to the exclusive jurisdiction of the Delaware Court for the purposes of any action or proceeding arising out of or in connection with this Agreement, (c) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (d) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or otherwise inconvenient forum.

Section 7.14 Certain Construction Rules .

(a) The article and section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. As used in this Agreement, unless otherwise provided to the contrary, (1) all references to days shall be deemed references to calendar days and (2) any reference to a “Section” or “Article” shall be deemed to refer to a section or article of this Agreement. The words “hereof,” “herein” and “hereunder” and words of similar import referring to this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” Unless otherwise specifically provided for herein, the term “or” shall not be deemed to be exclusive. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.

(b) For purposes of this Agreement, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan; references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, nominee, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner the person reasonably believed to be in the interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interest of the Company” for purposes of this Agreement and the DGCL.

(c) In the event of a merger, consolidation or amalgamation of the Company with or into any other entity, references to the “Company” shall include the entity surviving or resulting from the merger, consolidation or amalgamation as well as the Company, and Indemnitee shall stand in the same position under this Agreement with respect to the surviving or resulting entity as Indemnitee would stand with respect to the Company if its existence had continued upon and after the merger, consolidation or amalgamation.

Section 7.15 Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument, notwithstanding that both parties are not signatories to the original or same counterpart.

Section 7.16 Certain Persons Not Entitled to Indemnification . Notwithstanding any other provision of this Agreement (but subject to Section 7.1), Indemnitee shall not be entitled to indemnification or advancement of Expenses pursuant to the terms of this Agreement with respect to any Claim, issue or matter therein, brought or made by Indemnitee against the Company, except as specifically provided in Article III, Article IV or Section 7.3. In addition, the Company shall not be obligated pursuant to the terms of this Agreement:

(a) To indemnify Indemnitee if (and to the extent that) a final, non-appealable decision by a court or arbitration body having jurisdiction in the matter shall determine that such indemnification is not lawful; or

(b) To indemnify Indemnitee for the payment to the Company of profits pursuant to Section 16(b) of the Exchange Act, or Expenses incurred by Indemnitee for Claims in connection with such payment under Section 16(b) of the Exchange Act.

Section 7.17 Indemnification for Negligence, Gross Negligence, etc . Without limiting the generality of any other provision hereunder, it is the express intent of this Agreement that Indemnitee be indemnified and Expenses be advanced regardless of Indemnitee’s acts of negligence, gross negligence, intentional or willful misconduct to the extent that indemnification and advancement of Expenses is allowed pursuant to the terms of this Agreement and under applicable law.

Section 7.18 Mutual Acknowledgments . Both the Company and Indemnitee acknowledge that, in certain instances, applicable law (including applicable federal law that may preempt or override applicable state law) or public policy may prohibit the Company from indemnifying the directors, officers, employees, agents or fiduciaries of the Company under this Agreement or otherwise. For example, the Company and Indemnitee acknowledge that the U.S. Securities and Exchange Commission has taken the position that indemnification of directors, officers and controlling Persons of the Company for liabilities arising under federal securities laws is against public policy and, therefore, unenforceable. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the Securities and Exchange Commission to submit the question of indemnification to a court in certain circumstances for a determination of the Company’s right under public policy to indemnify Indemnitee. In addition, the Company and Indemnitee acknowledge that federal law prohibits indemnifications for certain violations of the Employee Retirement Income Security Act of 1974, as amended.

Section 7.19 Enforcement . The Company agrees that its execution of this Agreement shall constitute a stipulation by which it shall be irrevocably bound in any court or arbitration in which a proceeding by Indemnitee for enforcement of Indemnitee’s rights hereunder shall have been commenced, continued or appealed, that its obligations set forth in this Agreement are unique and special, and that failure of the Company to comply with the provisions of this Agreement will cause irreparable and irremediable injury to Indemnitee, for which a remedy at law will be inadequate. As a result, in addition to any other right or remedy Indemnitee may have at law or in equity with respect to breach of this Agreement, Indemnitee shall be entitled to injunctive or mandatory relief directing specific performance by the Company of its obligations under this Agreement. The Company agrees not to seek, and agrees to waive any requirement for the securing or posting of, a bond in connection with Indemnitee’s seeking or obtaining such relief.

Section 7.20 Successors and Assigns . All of the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and their respective successors, assigns, heirs, executors, administrators, legal representatives.

Section 7.21 Period of Limitations . No legal action shall be brought and no cause of action shall be asserted by or on behalf of the Company or any affiliate of the Company against Indemnitee or Indemnitee’s spouse, heirs, executors, or personal or legal representatives after the expiration of one year from the date of accrual of that cause of action, and any claim or cause of action of the Company or its affiliate shall be extinguished and deemed released unless asserted by the timely filing of a legal action within that one-year period; provided, however, that for any claim based on Indemnitee’s breach of fiduciary duties to the Company or its stockholders, the period set forth in the preceding sentence shall be three years instead of one year; and provided, further, that, if any shorter period of limitations is otherwise applicable to any such cause of action, the shorter period shall govern.

[signatures on following page]

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered to be effective as of the date first above written.

	REATA PHARMACEUTICALS, INC.

	By:	/s/ J. Warren Huff
	Name:	J. Warren Huff
	Title:	Chief Executive Officer

	INDEMNITEE :

		/s/ Dawn Carter Bir
	Name:	Dawn Carter Bir

Exhibit 10.2

EMPLOYMENT AGREEMENT

by and between

Reata Pharmaceuticals, Inc.

and

Jason D. Wilson

THIS EMPLOYMENT AGREEMENT (the “ Agreement ”) is made and entered into as of the 23rd day September of 2015, by and between Reata Pharmaceuticals, Inc., a Delaware corporation (together with its successors and assigns permitted hereunder, the “ Company ”), and Jason D. Wilson (the “ Executive ”).

The Board of Directors of the Company (the “ Board ”) has determined that it is in the best interests of the Company and its stockholders to assure that the Company will continue to enjoy the services of the Executive, and in order to accomplish this objective, the Board has caused the Company to enter into this Agreement.

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

1. Employment Period . Subject to earlier termination pursuant to Section 3 , the Company hereby agrees to employ the Executive, and the Executive hereby agrees to be employed by the Company, in accordance with the terms and provisions of this Agreement, for the period commencing on the date of this Agreement (the “ Effective Date ”) and ending at the close of business on September 22, 2019 (the “ Employment Period ”). Thereafter, such term of employment shall be extended automatically for successive one-year periods (such extended term, the “ Additional Employment Period ”) unless the Company or Executive provides the other with written notice no less than 30 days prior to the date the Employment Period or the Additional Employment Period, as applicable, would otherwise end either (i) declining to extend such term of employment, or (ii) requesting that the terms of this Agreement are renegotiated prior to the Agreement’s renewal. If the parties fail to enter into the renegotiation process within 30 days of receipt of such notice, this Agreement will be extended automatically as if such notice was not given.

2. Terms of Employment .

(a) Position and Duties.

(i) During the Employment Period, or any Additional Employment Period, the Executive shall serve as the Chief Financial Officer of the Company and as a Vice President of the Company and, in so doing, shall report to the Chief Executive Officer of the Company or such other person as shall be designated by the Chief Executive Officer. The Executive shall have supervision and control over, and responsibility for, such management and operational functions of the Company currently assigned to such positions, and shall have such other powers and duties (including holding officer positions with one or more subsidiaries of the Company) as may from time to time be prescribed by the Board, so long as such powers and duties are reasonable and customary for the Chief Financial Officer of an enterprise comparable to the Company.

(ii) During the Employment Period, or any Additional Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote full business time to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period, or any Additional Employment Period, it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions, or (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement.

(b) Compensation .

(i) Base Salary . During the Employment Period, or any Additional Employment Period, the Executive shall receive an annual base salary of $285,000 (the “ Annual Base Salary ”), which shall be paid on a semi-monthly basis in accordance with the customary payroll terms, conditions and practices of the Company. During the Employment Period, or any Additional Employment Period, the Annual Base Salary may be reviewed and may be increased from time to time in accordance with the compensation practices and guidelines of the Company for its executives. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. The term Annual Base Salary as utilized in this Agreement shall refer to the Executive’s Annual Base Salary as so increased.

(ii) Bonus . In addition to Annual Base Salary, the Executive shall be eligible to receive during the Employment Period, or any Additional Employment Period, an annual bonus (the “ Bonus ”), such Bonus to be awarded only upon the Company’s attainment of certain milestones to be determined by the Board (or a committee of the Board). The Bonus, if any, shall be payable annually to the Executive consistent with the practices for executives of the Company. The Executive’s target bonus (“ Target Bonus ”) will be 37% of the Executive’s Annual Base Salary.

(iii) Incentive, Savings and Retirement Plans . During the Employment Period, or any Additional Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other executives of the Company (the “ Investment Plans ”).

(iv) Welfare Benefit Plans . During the Employment Period, or any Additional Employment Period, the Executive and/or the Executive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs (the “ Welfare Plans ”) provided generally to other executives of the Company. In the event of a Change in Control, for a period of two years following the occurrence of the Change in Control, the Company, or its successor, will continue to provide the Executive and/or the Executive’s family, as the case may be, benefits that are not materially diminished, taken as a whole, from the benefits provided to the Executive and/or the Executive’s family, as the case may be, under the Welfare Plans in effect immediately prior to the Change in Control.

(v) Expenses . During the Employment Period, or any Additional Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive on behalf of the Company in accordance with the policies, practices and procedures of the Company, which provide an objectively determinable nondiscretionary definition of the expenses eligible for reimbursement. Notwithstanding any provision of this Agreement to the contrary, (A) the amount of expenses eligible to receive reimbursement during any calendar year shall not affect the amount of expenses for which the Executive is eligible to receive reimbursement during any other calendar year within the Employment Period, or any Additional Employment Period, (B) the reimbursement of expenses under this Section 2(b)(v) shall be made on or before the last day of the calendar year following the calendar year in which the expense was incurred and (C) the Executive will not receive a payment or other benefit in lieu of reimbursement under this Section 2(b)(v) .

(vi) Vacation and Holidays . During the Employment Period, or any Additional Employment Period, the Executive shall be entitled to paid vacation and paid holidays in accordance with the plans, policies, programs and practices of the Company for its executives.

3. Termination of Employment .

(a) Death or Disability . The Executive’s employment shall terminate automatically upon the Executive’s death during the Employment Period, or any Additional Employment Period. If a Disability (as defined below) of the Executive has occurred during the Employment Period, or any Additional Employment Period, and subject to Executive’s rights, if any, under the Family Medical Leave Act, Americans with Disabilities Act or similar local, state or federal law, the Company may give to the Executive written notice of its intention to terminate the Executive’s employment. In such event, the Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the “ Disability Effective Date ”), provided , that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties. For purposes of this Agreement, “ Disability ” shall mean that the Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.

(b) Cause . The Company may terminate the Executive’s employment during the Employment Period, or any Additional Employment Period, for Cause or without Cause. For purposes of this Agreement, “ Cause ” shall mean:

(i) commission by the Executive of an act of fraud upon, or willful misconduct toward, the Company;

(ii) a material breach by the Executive of the noncompetition provisions of Section 5 or of the Employee Confidentiality, Nondisclosure, Intellectual Property and Nonsolicitation Agreement described in Section 6 ;

(iii) the conviction of the Executive of any felony (or a plea of nolo contendere thereto); or

(iv) the Executive’s addiction to alcohol, drugs or any other controlled substance.

Upon the occurrence of any event described in Section 3(b) , the Company may terminate Executive’s employment hereunder for Cause by giving Executive a Notice of Termination to that effect as provided in Section 3(d) within 30 days after the occurrence of the event giving rise to Cause that specifies the date of Executive’s termination (which may be the date the Notice of Termination is delivered) and describes in reasonable detail the facts or circumstances giving rise to the Company’s right to terminate Executive’s employment for Cause (and, if applicable, the action required to cure same). If the effect of the occurrence of the event described in Section 3(b) may be cured, Executive shall have the opportunity to cure any such effect for a period of 30 days following receipt of the Company’s Notice of Termination. If, within 30 days following Executive’s receipt of a Notice of Termination for Cause, (A) Executive delivers written notice to the Company denying that Cause exists, the question of the existence or nonexistence of Cause will be subject to the dispute resolution procedure set forth in Section 9(f) ; or (B) Executive has not cured the facts or circumstances giving rise to the Company’s right to terminate Executive’s employment for Cause and shall not have delivered a notice pursuant to clause (A) herein, then Executive’s termination for Cause shall be effective as of the date specified in the Company’s Notice of Termination (which date may not be earlier than the date the Notice of Termination is delivered to Executive). If the Company does not give a Notice of Termination to Executive within 30 days after learning of the occurrence of an event giving rise to Cause, then this Agreement will remain in effect, and Executive may not be terminated for Cause based on the occurrence of the event that gave rise to Cause; provided, however, that the failure of the Company to terminate the Executive’s employment for Cause shall not be deemed a waiver of the Company’s right to terminate Executive’s employment for Cause upon the occurrence of a subsequent event described in Section 3(b) in accordance with the terms of this Agreement. Notwithstanding the foregoing, the right of the Company to terminate Executive’s employment for Cause under this Section 3(b) shall not limit Executive’s right to terminate his employment for Good Reason under Section 3(c) if Good Reason is determined to exist prior to the time Cause is determined to exist.

(c) Good Reason . The Executive’s employment may be terminated during the Employment Period, or any Additional Employment Period, by the Executive for Good Reason or without Good Reason. For purposes of this Agreement, “ Good Reason ” shall mean, without the express written consent of the Executive, the occurrence of any of the following:

(i) a material diminution in the Executive’s base compensation;

(ii) a material diminution in the Executive’s authority, duties or responsibilities; provided, however, following a Change in Control, the Executive’s authority, duties and responsibilities shall be deemed to have been materially diminished (even though his authority, duties and responsibilities have not actually been materially diminished) if, within two years after the Change in Control, the Executive is required to report to an executive of the parent company of the Company, or its successor, who is not serving as a senior vice president (or in a similar or higher position) of such parent company;

(iii) a material diminution in the authority, duties or responsibilities of the supervisor to whom the Executive is required to report; provided, however, that, except as provided in Section 3(c)(ii) , a change in the person to whom the Executive shall report pursuant to Section 2(a)(i) shall not be or constitute Good Reason;

(iv) a material diminution in the budget over which the Executive retains authority;

(v) a change in the geographic location at which the Executive must perform services of more than 50 miles in radius from such location as of the date of this Agreement; or

(vi) any other action or inaction that constitutes a material breach by the Company of this Agreement.

In the case of the Executive’s allegation of Good Reason, (A) the Executive shall provide notice to the Company of the event alleged to constitute Good Reason within 90 days after the occurrence of such event (such notice the “ Notice of Good Reason ,”) and (B) the Company shall have the opportunity to remedy the alleged Good Reason event within 30 days after receipt of notice of such allegation (the “ Cure Period ”). If, within the Cure Period, the Company delivers written notice to the Executive denying that Good Reason exists, the question of the existence or nonexistence of Good Reason will be subject to the dispute resolution procedure set forth in Section 9(f) . In the event the Company has not cured the facts or circumstances giving rise to the Executive’s right to terminate the Executive’s employment for Good Reason during the Cure Period and shall not have delivered a notice pursuant to the preceding sentence, then the Executive’s employment hereunder will be terminated for Good Reason on the 31 ^st day following the Cure Period. If the Executive does not give a Notice of Good Reason to the Company within 90 days after learning of the occurrence of an event giving rise to Good Reason, then this Agreement will remain in effect, and Executive may not terminate his employment for Good Reason based on the occurrence of the event that gave rise to Good Reason; provided, however, that the failure of the Executive to provide a Notice of Good Reason or terminate the Executive’s employment for Good Reason shall not be deemed a waiver of the Executive’s right to terminate the Executive’s employment for Good Reason upon the occurrence of a subsequent event described in Section 3(c) in accordance with the terms of this Agreement. Notwithstanding anything to the contrary contained herein, any isolated, insubstantial and inadvertent action not taken in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive shall not be or constitute Good Reason.

(d) Notice of Termination . Any termination by the Company for Cause or without Cause, or by the Executive for Good Reason or without Good Reason, shall be communicated by a Notice of Termination to the other party hereto. For purposes of this Agreement, a “ Notice of Termination ” means a written notice that (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (iii) other than with respect to a termination by the Executive for Good Reason, if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date, except for a termination of Executive’s employment due to a Disability, shall not be more than 15 days after the giving of such notice or the date the applicable cure period expires, whichever is later). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

(e) Date of Termination . “ Date of Termination ” means (i) if the Executive’s employment is terminated by the Company for Cause, or by the Executive without Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, (ii) if the Executive’s employment is terminated by the Executive for Good Reason, the 31 ^st day following receipt by the Company of the Notice of Good Reason (provided the Company does not otherwise remedy the alleged Good Reason event within the Cure Period), (iii) if the Executive’s employment is terminated by the Company without Cause, the date on which the Company notifies the Executive of such termination (unless a later date is specified in the Notice of Termination, in which case the Executive’s employment will be terminated on such later date), and (iv) if the Executive dies or incurs a Disability, the date of death of the Executive or the Disability Effective Date, as the case may be. If the Executive is a member of the Board, any continuation of the Executive’s service to the Company as a member of the Board on or after the Executive’s termination of employment shall not result in any deferral of the Date of Termination.

4. Obligations of the Company upon Termination .

(a) Termination by the Company for Cause or by the Executive other than for Good Reason . If, during the Employment Period, or any Additional Employment Period, the Executive’s employment with the Company is terminated by the Company for Cause or by the Executive other than for Good Reason (and not due to death or Disability), the Company shall have no further payment obligations to the Executive or his legal representatives under this Agreement, other than for:

(i) to the extent not theretofore paid, the sum of (w) the Executive’s Annual Base Salary earned through the Date of Termination, (x) the Bonus for the fiscal year ending immediately prior to the Date of Termination, (y) compensation previously deferred by the Executive (together with any accrued interest or earnings thereon), and (z) any accrued and unused vacation pay through the Date of Termination (the “ Accrued Obligations ”), which sum shall be paid within 15 days following the Date of Termination; and

(ii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive and/or the Executive’s family any other amounts or benefits required to be paid or provided or which the Executive and/or the Executive’s family is eligible to receive pursuant to this Agreement and under any plan, program, policy or practice or contract or agreement of the Company (“ Other Benefits ”).

(b) Death or Disability prior to, or more than two years after, a Change in Control . Upon the Executive’s death or Disability during the Employment Period, or any Additional Employment Period, but prior to the occurrence of a Change in Control or more than two years after the occurrence of a Change in Control, the Company shall have no further payment obligations to the Executive or his legal representatives under this Agreement, other than for (i) payment of the Accrued Obligations (within 15 days following the Date of Termination) and Other Benefits; (ii) payment of a lump sum cash amount equal to the Executive’s current Annual Base Salary, payable on the next payroll date immediately following the eighth day following the delivery to the Company of a properly executed Release in accordance with Section 4(f) of this Agreement; (iii) Welfare Benefit Continuation as defined, and pursuant to the terms and in the manner described, in Section 4(d)(ii) up to the 12 month, rather than the 24 month, anniversary of the Date of Termination; and (iv) subject to Section 4(f) , all equity awards granted by the Company to, or otherwise held by, the Executive shall immediately vest in full and any repurchase provisions (other than fair market value repurchase provisions) shall lapse and may be exercised and/or settled in accordance with the terms of the applicable plan or award agreement; provided, however, the Executive may elect, and the Company will allow, the payment of the exercise price of any outstanding stock options, and the satisfaction of any required tax withholding with respect to any outstanding stock option or other equity award, through the withholding of shares otherwise issuable to the Executive pursuant to the stock option or other equity award.

(c) Certain Terminations more than six months prior to, or more than two years after, a Change in Control by the Company other than for Cause or by Executive for Good Reason . If, during the Employment Period, or any Additional Employment Period, but more than six months prior to, or more than two years after, the occurrence of a Change in Control, the Executive’s employment with the Company is terminated by the Company for any reason other than for Cause (and not due to death or Disability) or by the Executive for Good Reason, the Executive will be entitled to (i) the Accrued Obligations and Other Benefits, payable in accordance with Section 4(a)(i) and (ii) , (ii) subject to Sections 4(f) and (h) , a lump sum cash amount equal to the Executive’s then current Annual Base Salary, payable on the next payroll date immediately following the eighth day following the Executive’s delivery to the Company of a properly executed Release in accordance with Section 4(f) of this Agreement, and (iii) Welfare Benefit Continuation as defined, and pursuant to the terms and in the manner described, in Section 4(d)(ii) up to the 12 month, rather than the 24 month, anniversary of the Date of Termination. In addition, notwithstanding the provisions of any applicable plan or agreement and subject to Section 4(f) , equity awards held by the Executive that otherwise would have been forfeited will continue to remain outstanding, unvested (and will not continue vesting) and subject to forfeiture for a period of six months following the Date of Termination (such equity awards, the “ Unvested Equity Awards ”). If a Change in Control occurs during such six month period the Unvested Equity Awards will vest in accordance with Section 4(d)(v) . If a Change in Control does not occur during such six month period, the Unvested Equity Awards will be forfeited immediately following such six month period. The Executive may elect, and the Company will allow, the payment of the exercise price of any outstanding vested stock options, and the satisfaction of any required tax withholding with respect to any vested outstanding stock option or other equity award, through the withholding of shares otherwise issuable to the Executive pursuant to the stock option or other equity award.

(d) Certain Terminations within six months prior to, or within two years following, a Change in Control . In the event that the Executive’s employment is terminated by the Company for any reason other than Cause or by the Executive for Good Reason or the Executive dies or incurs a Disability, in each case, during the Employment Period, or any Additional Employment Period, and such termination occurs within six months prior to (excluding death or Disability), or within two years after, a Change in Control, the following provisions shall apply and Sections 4(b) and (c) shall not be applicable until Section 4(d) is no longer applicable:

(i) The Company shall pay to the Executive (A) the Accrued Obligations within 15 days following the Date of Termination, and (B) subject to Sections 4(f) and 4(h) , a lump sum cash amount equal to two times the Executive’s then current Annual Base Salary, such sum to be paid on the next payroll date immediately following the eighth day following the Executive’s delivery to the Company of a properly executed Release in accordance with Section 4(f) of this Agreement.

(ii) Until the earlier to occur of (A) the 24 month anniversary of the Date of Termination or (B) the Executive’s acceptance of full-time employment with another entity, the Company shall continue benefits provided under Welfare Plans to the Executive and/or the Executive’s family at least equal to those that would have been provided to them if the Executive’s employment had not been terminated (“ Welfare Benefit Continuation ”) pursuant to an in-kind benefit arrangement that satisfies the requirements of Treasury Regulation § 1.409A-3(i)(1)(iv)(A), and the Company-provided costs of such Welfare Benefit Continuation will be imputed as income to the Executive and reported on Form W-2; provided , that in the event the Company is unable to provide the Welfare Benefit Continuation under its Welfare Plans or to the extent such Welfare Benefit Continuation would subject the Company to negative tax consequences, the Company will reimburse the Executive for amounts necessary to enable the Executive to obtain similar benefits, and any such reimbursement will be made in accordance with the provisions of Treasury Regulation § 1.409A-3(i)(1)(iv). Such Welfare Benefit Continuation provided in this Section 4(d)(ii) is in addition to any rights Executive may have to continue such coverages under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”). The COBRA continuation period shall begin on the day following the end of the Welfare Benefit Continuation period provided in this Section 4(d)(ii) .

(iii) Subject to Section 4(f) , notwithstanding the provisions of any applicable plan or agreement, all equity awards granted by the Company to, or otherwise held by, the Executive shall immediately vest in full and any repurchase provisions (other than fair market value repurchase provisions) will lapse and such awards may be exercised and/or settled in accordance with the terms of the applicable plan or award agreement; provided, however, the Executive may elect, and the Company will allow, the exercise of any outstanding stock options, and the satisfaction of any required tax withholding with respect to any outstanding stock option or other equity award, through the withholding of shares otherwise issuable to the Executive pursuant to the stock option or other equity award.

(iv) To the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive and/or the Executive’s family the Other Benefits.

(v) If the Executive’s employment is terminated within six months prior to a Change in Control and the provisions of Section 4(d) apply, but the provisions of Section 4(b) or 4(c) were initially applied, then, subject to Section 4(f) , upon the Change in Control, the Company shall pay, no later than the first payroll date following such Change in Control, additional payments and provide additional benefits and vesting in order to provide the Executive the payments, benefits and vesting as set forth in Section 4(d) . The post employment exercise period for stock options under the Equity Documents shall be measured from the date of the Change in Control.

(e) In addition, upon a Change in Control, if the Executive’s employment with the Company (or its successor) continues following the Change in Control, any outstanding equity awards that are not vested on the date of the Change in Control shall become vested and, as applicable, exercisable with respect to one-eighteenth of all such unvested equity awards on the one month anniversary of the Change in Control and thereafter with respect to an additional one-eighteenth of all unvested equity awards at the time of the Change in Control on each subsequent month anniversary of the Change in Control such that the equity awards will be 100% vested and, as applicable, exercisable on the eighteen month anniversary of the Change in Control; provided, however, that if 100% of the equity awards would otherwise become vested pursuant to the vesting rules stated above or in the Equity Documents prior to the eighteen month anniversary of the date of the Change in Control, then the equity awards will become vested and, as applicable, exercisable in accordance with such vesting rules or Equity Documents. For purposes of this Agreement, “ Change in Control ” means the occurrence of any of the following events:

(i) The Company is not the surviving entity in any merger or consolidation (or survives only as a subsidiary of an entity other than a previously wholly owned subsidiary of the Company) and as a result of such merger or consolidation, stockholders of the Company immediately prior to such merger cease to own more than 50% of the outstanding capital stock of the surviving corporation determined on a fully diluted basis;

(ii) The Company sells, leases, or exchanges or agrees to sell, lease, or exchange more than 50% of its assets to any other person or entity (other than a wholly owned subsidiary of the Company);

(iii) The Company is to be dissolved and liquidated (in a dissolution taxed under Section 331 of the Internal Revenue Code of 1986, as amended (the “ Code ”));

(iv) Any person or entity, including a “group” as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, acquires or gains ownership or control (including, without limitation, power to vote), directly, by merger or otherwise, of more than 50% of the outstanding shares of the Company’s voting stock (based upon voting power) and as a result of such acquisition, the stockholders holding a majority of the capital stock of the Company receive cash or marketable securities for their shares of capital stock; or

(v) As a result of or in connection with a contested election of directors, the persons who were directors before such election will cease to constitute a majority of the Board.

Notwithstanding the foregoing definition of Change in Control (other than clause (iii) of such definition), a Change in Control shall only be deemed to occur upon a “change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company” under Section 409A of the Code.

(f) Release . Notwithstanding any other provision in this Agreement to the contrary, in consideration for receiving the accelerated vesting described in Sections 4(b) or 4(d) and the payments described in Section 4(b)(ii) , Section 4(c)(ii) or Section 4(d)(i)(B) , the Executive hereby agrees to execute (and not revoke) a release agreement in the form attached hereto as Exhibit A (the “ Release ”) within 60 days of the Date of Termination. If the Executive fails to properly execute and timely deliver the Release (or revokes the Release), the Executive agrees that the Executive shall not be entitled to receive the accelerated vesting described in Sections 4(b) or 4(d) and the payments described in Section 4(b)(ii) , Section 4(c)(ii) or Section 4(d)(i)(B) . For purposes of this Agreement, the Release shall be considered to have been executed by the Executive if it is signed by the Executive’s legal representative (in the case of the Executive’s incapacity due to physical or mental illness) or on behalf of the Executive’s estate (in the case of the Executive’s death).

(g) Gross-Up for Certain Taxes . In the event that it is determined that any payment (other than the Gross-Up payment provided for in this Section 4(g) ) or distribution by the Company (or any of its Affiliates) to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a “ Payment ”), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto) by reason of being considered “contingent on a change in ownership or control” of the Company, within the meaning of Section 280G of the Code or any successor provision thereto (such tax being hereafter referred to as the “ Excise Tax ”), then the Executive will be entitled to receive an additional payment or payments (a “ Gross-Up Payment ”). The Gross-Up Payment will be in an amount such that, after payment by the Executive of all taxes, penalties and interest, including any Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. For purposes of determining the amount of the Gross-Up Payment, the Executive will be considered to pay (A) federal income taxes at the highest rate in effect in the year in which the Gross-Up Payment will be made and (B) state and local income taxes at the highest rate in effect in the state or locality in which the Gross-Up Payment would be subject to state or local tax, net of the maximum reduction in federal income tax that could be obtained from deduction of such state and local taxes. The determination of whether an Excise Tax would be imposed, the amount of such Excise Tax, and the calculation of the amounts referred to in this Section 4(g) will be made at the expense of the Company by the Company’s regular independent accounting firm (the “ Accounting Firm ”), which shall provide detailed supporting calculations. Any determination by the Accounting Firm will be binding upon the Company and the Executive. The Gross-Up Payment will be paid to the Executive as soon as administratively practicable following the later of (i) the date Executive is required to pay the excise tax imposed by Section 4999 of the Code, or (ii) in the event the Executive is determined, in accordance with the methods specified in the regulations issued under Section 409A of the Code, to be a “specified employee” (within the meaning of Section 409A(a)(2)(B)(i) of the Code) of the Company at the time of the Executive’s “separation from service” (within the meaning of Section 409A(a)(2)(A)(i) of the Code and the applicable regulations and administrative guidance issued thereunder), the first day of the seventh month after the date of the Executive’s “separation from service” or, if earlier, the date of death of Executive. In the event that the Excise Tax is later determined by the Accounting

Firm or pursuant to any proceeding or negotiations with the Internal Revenue Service to exceed the Gross-Up Payment at the time the payment is made under this Section 4(g) (including, but not limited to, by reason of any payment the existence or amount of which cannot be determined at the time of such payment), the Company shall make an additional payment in respect of such excess (plus any interest or penalty payable with respect to such excess) at the time that the amount of such excess is finally determined. In the event that the Excise Tax is subsequently determined by the Accounting Firm or pursuant to any proceeding or negotiations with the Internal Revenue Service to be less than the Gross-Up Payment at the time payment is made under this Section 4(g) , the Executive shall repay to the Company, at the time that the amount of such reduction in the Excise Tax is finally determined, the portion of such prior payment that would not have been paid if such Excise Tax had been applied in initially calculating such payment, plus interest on the amount of such repayment at the rate provided in section 1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event that any portion of the payment made hereunder that is to be refunded to the Company has been paid to any Federal, state or local tax authority, repayment thereof shall not be required until actual refund or credit of such portion has been made to the Executive, and interest payable to the Company shall not exceed interest received or credited to the Executive by such tax authority for the period it held such portion. The Gross-Up Payment will be made in a manner that complies with Treasury Regulation § 1.409A-3(i)(1)(v).

(h) Specified Employee Provisions . For purposes of determining the time of payment of any severance payable pursuant to Section 4(b)(ii) , Section 4(c)(ii) and Section 4(d)(i)(B) , and the timely return of the Release in accordance with Section 4(f) , the Date of Termination shall be the date that the Executive incurs a “separation from service” within the meaning of Treasury Regulation § 1.409A-1(h). To the extent the Executive’s “separation from service” is within the 60 day period ending on December 31 of any calendar year, the severance payable pursuant to Section 4(b)(ii) , Section 4(c)(ii) and Section 4(d)(i)(B) will be paid no earlier than the first business day of the following calendar year. In the event the Executive is determined, in accordance with the methods specified in the regulations issued under Section 409A of the Code, to be a “specified employee” (within the meaning of Section 409A(a)(2)(B)(i) of the Code) of the Company at the time of the Executive’s “separation from service” (within the meaning of Section 409A(a)(2)(A)(i) of the Code and the applicable regulations and administrative guidance issued thereunder) then, in-lieu of providing Welfare Benefit Continuation pursuant to this Section 4 with respect to benefits that would not constitute medical expenses deductible under section 213 of the Code (disregarding the requirement of section 213(a) of the Code that the deduction is available only to the extent that such expenses exceed 7.5 percent of adjusted gross income) (“ Non-Medical Continuation Benefits ”), during the six month period following Executive’s “separation from service,” the Company shall pay to the Executive an amount equal to the Company-provided costs of such Non-Medical Continuation Benefits in a single lump sum payment on the first day of the seventh month following the Executive’s “separation from service.” Nothing in this Section 4(h) will impact the obligation of the Company to provide Welfare Benefit Continuation as provided in this Section 4 with respect to Welfare Benefits other than Non-Medical Continuation Benefits or to provide Non-Medical Continuation Benefits following the six month period following Executive’s “separation from service.” This Section 4(h) will have no effect with respect to benefits payable pursuant to this Agreement due to the Executive’s Disability.

5. Restrictive Covenants .

(a) Confidential Information; Assignment of Rights to Intellectual Property .

(i) The Executive hereby recognizes and acknowledges that the business of the Company and its Affiliates is highly competitive and that certain information related to their business, including, without limitation, their plans, strategies, research and development, testing methods, clinical trial results, costs, prices, business methods, customer names and needs, prospect names and needs, names of referral sources, identity of contact persons, marketing plans, reports, manuals, methods, costing procedures, information relating to the services provided, developed, used or in the process of development, their services, customer-related lists and other customer information, formatting and programming concepts and plans, computer programs, simulations, data bases, pricing policies, financial information, methods of doing business, policy and/or procedure manuals, training and recruiting procedures, accounting procedures, the status and content of their contracts with their customers, the identity and performance of their employees, their business philosophy, and servicing methods and techniques at any time used, developed, or investigated by them, which are not generally known by or available to the public or which are maintained as confidential by them, comprises confidential or proprietary business information that is a valuable, special, and unique asset of the Company and its Affiliates, that such confidential or proprietary information has been developed through their expenditure of substantial time and money, and that all such confidential or proprietary information could be used by the Executive and others to compete unfairly with them (all such information is jointly referred to herein as “ Confidential Information and Trade Secrets ”). The Executive hereby agrees that the Confidential Information and Trade Secrets shall constitute trade secrets, and further agrees not to use or disclose such information except as required to do so by subpoena or other legal process (after the Company has been given reasonable notice and opportunity to seek relief from such subpoena or other legal process). The Executive also agrees to maintain in confidence any confidential or proprietary information of third parties that the Executive received during the course of and as a result of the Executive’s employment with the Company and its Affiliates. No information otherwise in the public domain (other than by an act of the Executive in violation hereof) shall be considered Confidential Information and Trade Secrets. The Executive understands that the restrictions set forth in this Section 5(a)(i) shall continue to apply following the Executive’s termination of employment with the Company, regardless of the reason for such termination.

(ii) All documents, records, tapes and other media of every kind and description relating to the business, present or otherwise, of the Company and any copies, in whole or in part, thereof (“ Documents ”), whether or not prepared by the Executive, shall be the sole and exclusive property of the Company. The Executive shall safeguard all Documents and shall surrender to the Company all Documents in Executive’s possession or control at the time Executive’s employment terminates, or at such earlier time or times as the Company may specify.

(iii) The Executive shall promptly and fully disclose all Intellectual Property to the Company. “ Intellectual Property ” means all information, ideas, concepts, improvements, discoveries and inventions, whether patentable or not, and whether or not reduced to practice, that are conceived, developed, made or acquired by the Company, either individually or jointly with others, and that relate to the past, present or anticipated business of the Company, irrespective of whether the Executive utilized the Company’s time or facilities and irrespective of whether such information, ideas, concepts, improvements, discoveries and inventions were conceived, developed, discovered or acquired by the Executive on the job, at home or elsewhere. The Executive hereby assigns and agrees to assign to the Company (or as otherwise directed by the Company) Executive’s full right, title and interest in and to all Intellectual Property. The Executive agrees to execute any and all applications for domestic and foreign patents, copyrights or other proprietary rights (including, without limitation, the execution and delivery of instruments of further assurance or confirmation) requested by the Company to assign the Intellectual Property to the Company and to permit the Company to enforce any patents, copyrights or other proprietary rights to the Intellectual Property. The Executive will not charge the Company for time spent in complying with any such obligation to execute. The Executive will, at the Company’s expense, take such other actions as the Company may reasonably request to so assign or enforce such Intellectual Property. All copyrightable Intellectual Property that Executive created during Executive’s employment is considered “work made for hire.”

(b) Non-Competition; Non-Solicitation .

(i) The Company hereby makes a binding promise not conditioned upon continued employment to provide the Executive with Confidential Information and Trade Secrets above and beyond any Confidential Information and Trade Secrets the Executive may have previously received. In order in part to protect the Confidential Information and Trade Secrets, and as part of the consideration for the payments described in Section 4 of this Agreement, the Company and the Executive agree to the provisions of this Section 5(b) . As a part of the employment relationship, the Executive learned of and the Company disclosed to the Executive Confidential Information and Trade Secrets. Accordingly, the Executive hereby agrees that, for one year after the Executive ceases to provide services to the Company, the Executive will not:

A. directly or indirectly, individually or as an officer, director, employee, stockholder, consultant, contractor, partner, joint venturer, agent, equity owner or in any capacity whatsoever, (1) engage in any Competing Business (as hereinafter defined) or (2) divert or take away any customers of the Company or its Affiliates. Notwithstanding the foregoing, the Company agrees that the Executive may own less than five percent of the outstanding voting securities of any publicly traded company that is a Competing Business so long as the Executive does not otherwise participate in such Competing Business in any way prohibited by the preceding clause;

B. use Executive’s access to, knowledge of, or application of Confidential Information and Trade Secrets to perform any duty for any Competing Business; it being understood and agreed to that this Section 5(b)(i)(B) shall be in addition to and not be construed as a limitation upon the covenants in Section 5(a) ;

C. directly or indirectly, for Executive or for others, recruit, solicit or induce any employee of the Company or its Affiliates to terminate his or her employment with the Company or its Affiliates, or hire or assist in the hiring of any such employee by a Person not affiliated with the Company or its Affiliates; or

D. induce or attempt to induce any customer, client, supplier, service provider, researcher, scientist or other business relation of the Company or its Affiliates to cease doing business with the Company or its Affiliates, or in any way interfere with the relationship between the Company and any such Person.

(ii) The restrictions in this Section 5(b) shall be in addition to any restrictions imposed upon the Executive by statute or at common law.

(iii) “ Competing Business ” means any business that researches, develops, manufactures, markets, licenses or sells (A) antioxidant inflammation modulators that target Keap 1 and activate Nrf2 or have similar mechanisms of action or (B) any other product, compound, or agent having the same or similar mechanisms of action as any product, compound or agent that is being actively developed, manufactured, marketed, licensed or sold by the Company at the Date of Termination.

(iv) “ Affiliate ” means, with respect to the Company or any other specified Person, any other Person directly or indirectly controlling, controlled by or under common control with the Company or such other specified Person, where control may be by management authority, equity interest or other means.

(v) “ Person ” means any person or entity of any nature whatsoever, specifically including an individual, a firm, a company, a corporation, a partnership, a limited liability company, a trust or other entity.

(c) Scope of Prohibited Activities . The parties hereby acknowledge that the restrictions in this Section 5 have been specifically negotiated and agreed to by the parties hereto and are limited only to those restrictions necessary to protect the Company from unfair competition and to protect the Confidential Information and Trade Secrets and the business and goodwill of the Company and its Affiliates. The parties hereby agree that if the scope or enforceability of any provision, paragraph or subparagraph of this Section 5 is in any way disputed at any time, and should a court find that such restrictions are overly broad, the court may modify and enforce the covenant to the extent that it believes to be reasonable under the circumstances. Each provision, paragraph and subparagraph of the Section 5 is separable from every other provision, paragraph, and subparagraph and constitutes a separate and distinct covenant. Nevertheless, the Executive agrees that the enforcement of the restrictions in this Section 5 would not cause the Executive any undue hardship or unreasonably interfere with Executive’s ability to earn a livelihood.

(d) Non-Disparagement . The Executive and the Company each agree to refrain from engaging in any conduct, or from making any comments or statements, which have the purpose or effect of harming the Executive’s reputation or goodwill, on the one hand, or the reputation or goodwill of the Company or any of its Affiliates, employees, directors or stockholders, on the other hand.

6. Full Settlement . The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement. Neither the Executive nor the Company shall be liable to the other party for any damages in addition to the amounts payable under Section 4 hereof arising out of the termination of the Executive’s employment prior to the end of the Employment Period, or any Additional Employment Period; provided , however , that the Company shall be entitled to seek damages for any breach of the noncompetition provisions of Section 5 hereof or of the Employee Confidentiality, Nondisclosure, Intellectual Property and Nonsolicitation Agreement, dated May 5 , 2008 by and between the Executive and the Company.

7. Successors .

(a) This Agreement is personal to the Executive and, without the prior written consent of the Company, shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.

(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, pursuant to a Change in Control or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “ Company ” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

8. Effect of Agreement on Other Benefits . The existence of this Agreement shall not prohibit or restrict the Executive’s entitlement to full participation in the executive compensation, executive benefit and other plans or programs in which executives of the Company are eligible to participate.

9. Miscellaneous .

(a) This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or sent by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:


If to the Executive :	Jason D. Wilson
	1209 Yuma Drive
	Frisco, Texas 75033

If to the Company :	Reata Pharmaceuticals, Inc.
	2801 Gateway Drive, Suite 150
	Irving, Texas 75063
	Attention: Chief Executive Officer

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

(c) If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a portion of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

(d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(e) The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or of any other provision or right of this Agreement.

(f) If any dispute arises out of this Agreement, the “complaining party” shall give the “other party” written notice of such dispute. The other party shall have 10 business days to resolve the dispute to the complaining party’s satisfaction. If the dispute is not resolved by the end of such period, either disputing party may require the other to submit to non-binding mediation with the assistance of a neutral, unaffiliated mediator. If the parties encounter difficulty in agreeing upon a neutral unaffiliated mediator, they shall seek the assistance of the American Arbitration Association in the selection process. If mediation is unsuccessful or if mediation has not commenced, in either case within 30 days after the other party received the notice of dispute, the complaining party may by written notice (the “ Notice ”) demand arbitration of the dispute as set out below, and each party hereto expressly agrees to submit to, and be bound by, such arbitration.

(i) Each party will, within 10 business days of the Notice, nominate an arbitrator, who shall be a non-neutral arbitrator. Each nominated arbitrator must be someone experienced in dispute resolution and of good character without moral turpitude and not within the employ or direct or indirect influence of the nominating party. The two nominated arbitrators will, within 10 business days of nomination, agree upon a third arbitrator, who shall be neutral. If the two appointed arbitrators cannot agree on a third arbitrator within such period, the parties may seek such an appointment through any permitted court proceeding or by the American Arbitration Association (“ AAA ”). The three arbitrators will set the rules and timing of the arbitration, but will generally follow the rules of the AAA and this Agreement where same are applicable and shall provide for a reasoned opinion.

(ii) The arbitration hearing will in no event take place more than 180 days after the appointment of the third arbitrator.

(iii) The mediation and the arbitration will take place in Irving, Texas unless otherwise unanimously agreed to by the parties.

(iv) The results of the arbitration and the decision of the arbitrators will be final and binding on the parties and each party agrees and acknowledges that these results shall be enforceable in a court of law.

(v) All costs and expenses of the mediation and arbitration shall be born equally by the Company and the Executive. The Arbitrator shall award the prevailing party its reasonable attorneys fees incurred in connection with the dispute.

(g) The Company and the Executive hereby agree that Sections 4, 5, 6, 7, 8 and 9, shall survive the expiration of the Employment Period, and any Additional Employment Period, in accordance with their terms.

(h) The parties hereto intend that any amounts payable hereunder comply with or are exempt from Section 409A of the Code (“ Section 409A ”) (including under Treasury Regulation §§ 1.409A-1(b)(4) (“short-term deferrals”) and (b)(9) (“separation pay plans,” including the exceptions under subparagraph (iii) and subparagraph (v)(D)) and other applicable provisions of Treasury Regulation §§ 1.409A-1 through A-6). For purposes of Section 409A, each of the payments that may be made under this Agreement shall be deemed to be a separate payment for purposes of Section 409A. This Agreement shall be administered, interpreted and construed in a manner that does not result in the imposition of additional taxes, penalties or interest under Section 409A. The Company and the Executive agree to negotiate in good faith to make amendments to the Agreement, as the parties mutually agree are necessary or desirable to avoid the imposition of taxes, penalties or interest under Section 409A. Neither the Company nor the Executive shall have the right to accelerate or defer the delivery of any such payments or benefits except to the extent specifically permitted or required by Section 409A.

(i) The parties hereto agree that, in the event of any conflict or inconsistency between this Agreement and the terms of any equity award agreement, this Agreement shall govern and shall supersede the terms of the equity award agreement. The parties hereto agree that, in the event of any conflict or inconsistency between this Agreement and the plan document governing any equity award, the terms of the plan document shall control and, if necessary, this Agreement shall be deemed amended so as to carry out the purpose and intent of the plan document. In the event of any inconsistency between any provision of this Agreement and any provision of any employee handbook, personnel manual, program, policy, or arrangement of the Company or any of its Affiliates, or any provision of any agreement, plan, or corporate governance document of any of them (other than the terms of the plan document govnerning any equity award), the provisions of this Agreement shall control unless the Executive otherwise agrees in a signed writing that expressly refers to the provision whose control the Executive is waiving. The Company agrees not to impose any restrictions, enforceable by injunction, on Executive’s post-employment activities, other than those expressly set forth in this Agreement.

(j) Each party hereto agrees with the other party hereto that it will cooperate with such other party and will execute and deliver, or cause to be executed and delivered, all such other instruments and documents, and will take such other actions, as such other party may reasonably request from time to time to effectuate the provisions and purpose of this Agreement.

(k) The provisions of this Agreement constitute the complete understanding and agreement among the parties with respect to the subject matter hereof. This Agreement supersedes any prior employment agreement between the Company and the Executive.

(l) This Agreement may be executed in two or more counterparts.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from its Board, the Company has caused this Agreement to be executed in its name on its behalf, as of the date first written above.

	EXECUTIVE

		/s/ Jason D. Wilson
		Jason D. Wilson

	REATA PHARMACEUTICALS, INC.

	By:	/s/ J. Warren Huff
	Name:	J. Warren Huff
	Title:	Chief Executive Officer

EXHIBIT A

S-1

EXHIBIT A

RELEASE

This Release (“ Release ”) is entered into between you, the undersigned employee, and Reata Pharmaceuticals, Inc., a Delaware corporation (the “ Company ”), in connection with the Employment Agreement between you and the Company dated as of _________, ____ (the “ Employment Agreement ”). You have __ days to consider this Release, which you agree is a reasonable amount of time. In order to receive the consideration set forth in Section 2 below, you must return this Release to the Company on or before ____________, ____.

10. Definitions .

(a) “ Released Parties ” means the Company and its past, present and future parents, subsidiaries, divisions, successors, predecessors, employee benefit plans and affiliated or related companies, and also each of the foregoing entities’ past, present and future owners, officers, directors, stockholders, investors, partners, managers, principals, members, committees, administrators, sponsors, executors, trustees, fiduciaries, employees, agents, assigns, representatives and attorneys, in their personal and representative capacities. Each of the Released Parties is an intended beneficiary of this Release.

(b) “ Claims ” means all theories of recovery of whatever nature, whether known or unknown, recognized by the law or equity of any jurisdiction. It includes but is not limited to any and all actions, causes of action, lawsuits, claims, complaints, petitions, charges, demands, liabilities, indebtedness, losses, damages, rights and judgments in which you have had or may have an interest. It also includes but is not limited to any claim for wages, benefits or other compensation; provided, however that nothing in this Release will affect your entitlement to any of the following, none of which shall be deemed to be a Claim: (i) benefits pursuant to the terms of any employee benefit plan (as defined in the Employee Retirement Income Security Act of 1974, as amended) sponsored by the Company in which you are a participant; (ii) outstanding equity compensation awards previously granted to you pursuant to any equity compensation plan sponsored by the Company (the “ Equity Plan and Equity Awards ”); (iii) to enforce your rights to receive the consideration set forth in Section 2 below and any other rights under the Employment Agreement; or (iv) indemnification and D&O insurance (as set forth in the Employment Agreement, any other agreement to which you and the Company are a party, or the charter or bylaws of the Company) (the “ Indemnification Rights ”). The term Claims also includes but is not limited to claims asserted by you or on your behalf by some other person, entity or government agency.

11. Consideration . The Company agrees to provide the accelerated vesting described in [Section 4(b)] [Section 4(d)] and to pay you the consideration set forth in [Section 4(b)(ii)] [Section 4(c)(ii)] [Section 4(d)(i)(B)] of the Employment Agreement. The Company will make the payment(s) to you on the first pay date of the Company occurring at least eight (8) days following the date you sign this Release (and return it to the Company). You acknowledge that any payment that the Company makes to you under this Release is in addition to anything else of value to which you are entitled and that the Company is not otherwise obligated to make such payment to you.

12. Release of Claims .

(a) You — on behalf of yourself and your heirs, executors, administrators, legal representatives, successors, beneficiaries, and assigns — unconditionally release and forever discharge the Released Parties from, and waive, any and all Claims that you have or may have against any of the Released Parties arising from your employment with the Company, the termination thereof, and any other acts or omissions occurring on or before the date you sign this Release.

(b) The release set forth in Paragraph 3(a) includes, but is not limited to, any and all Claims under (i) the common law (tort, contract or other) of any jurisdiction; (ii) the Rehabilitation Act of 1973, the Age Discrimination in Employment Act of 1967 and the Older Worker’s Benefit Protection Act of 1990, as amended, the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964, and any other federal, state and local statutes, ordinances, employee orders and regulations prohibiting discrimination or retaliation upon the basis of age, race, sex, national original, religion, disability, or other unlawful factor; (iii) the National Labor Relations Act; (iv) the Employee Retirement Income Security Act; (v) the Family and Medical Leave Act; (vi) the Fair Labor Standards Act; (vii) the Equal Pay Act; (viii) the Worker Adjustment and Retraining Notification Act; and (ix) any other federal, state or local law.

(c) In furtherance of this Release, you promise not to bring any Claims against any of the Released Parties in or before any court or arbitral authority.

13. Acknowledgment . You acknowledge that, by entering into this Release, the Company does not admit to any wrongdoing in connection with your employment or termination, and that this Release is intended as a compromise of any Claims you have or may have against the Released Parties. You acknowledge that you continue to be subject to the Employee Confidentiality, Nondisclosure, Intellectual Property and Nonsolicitation Agreement by and between you and the Company.

14. ADEA Rights . You further acknowledge that:

(a) You have been advised that you have the right to seek legal counsel before signing this Release and you have had adequate opportunity to do so. You warrant that you are executing this Release voluntarily and of your own free will, after having a reasonable period of time to review and deliberate regarding its meaning and effect.

(b) [You have been provided with, and attached to this Release as Annex A is, a listing of: (i) the job titles and ages of all employees selected for termination and offered a payment in exchange for entering into an agreement and release; (ii) the ages of all employees in the same job classification or organizational unit who were not selected for termination and not eligible to receive a payment in exchange for entering into an agreement and release; and (iii) information about coverage, eligibility factors and time limits associated with such terminations and related agreements and releases.] [To be included as applicable.]

(c) You have been given at least [___________] days to review this Release and you understand that if you do not accept this Release by returning an executed copy to the Company on or before ___________, ___, this offer will expire.

(d) You have seven (7) days after signing this Release to revoke it. This Release will not become effective or enforceable until the revocation period has expired. Any notice of revocation of the Release is effective only if received by the Chief Financial Officer, in care of the Company at 2801 Gateway Drive, Suite 150, Irving, Texas, 75063, in writing by the close of business at 5:00 p.m. Central Time on the seventh day after your signing of this Release. If you revoke your acceptance of this Release pursuant to this Section 5(d), the Company will not provide you with any of the consideration described in Section 2 above and all other terms of this Release will become null and void.

15. Applicable Law . This Release shall be construed and interpreted pursuant to the laws of the State of Texas without regard to its choice of law rules.

16. Severability . Each part, term, or provision of this Release is severable from the others. Notwithstanding any possible future finding by a duly constituted authority that a particular part, term, or provision is invalid, void, or unenforceable, this Release has been made with the clear intention that the validity and enforceability of the remaining parts, terms and provisions shall not be affected thereby. If any part, term, or provision is so found invalid, void or unenforceable, the applicability of any such part, term or provision shall be modified to the minimum extent necessary to make it or its application valid and enforceable.

17. Litigation Assistance and Cooperation . You acknowledge and affirm that you may be a witness in litigation, arbitrations, government or other administrative proceedings involving the Company of which you have specific knowledge. In connection therewith, you covenant and agree, upon reasonable prior notice and during normal business hours, to make yourself reasonably available to and otherwise reasonably assist and cooperate with the Company, and with its respective attorneys and advisors in connection with any such litigation, arbitrations, government or other administrative proceeding; provided, that, in connection with so making yourself available to, assisting or cooperating with such parties (i) the Company shall pay you a mutually agreeable per diem rate, bi-weekly in arrears, (ii) the Company shall bear, and reimburse you for, all out-of-pocket expenses reasonably incurred by you in connection with such services, and (iii) you shall not be required to devote an amount of time that would materially interfere with your other professional responsibilities or services provided to any other person or entity.

18. Other Agreements . The Company and you acknowledge and agree that each party has continuing obligations to the other party under the Employment Agreement, the Indemnification Rights, and Equity Plan and Equity Agreements. Accordingly, the Company and you acknowledge and agree that, to the extent expressly provided in each agreement, the Employment Agreement, Indemnification Rights and Equity Plan and Equity Agreements shall remain in full force and effect in accordance with their respective terms.

I ACKNOWLEDGE THAT I HAVE CAREFULLY READ THE FOREGOING AGREEMENT, UNDERSTAND ALL OF ITS TERMS, UNDERSTAND THAT IT CONTAINS A COMPLETE RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS, AND AM ENTERING INTO IT VOLUNTARILY.


	Name:


	Date:

Accepted and Agreed:

	REATA PHARMACEUTICALS, INC.

	By:
	Name:
	Title:

	Date:

ANNEX A

ATTACHMENT TO SEVERANCE AGREEMENT AND GENERAL RELEASE OF CLAIMS

The decisional unit was all employees of Reata Pharmaceuticals, Inc. (the “ Company ”). Employees were selected for termination on the basis of business necessity . All persons whose employment was selected for termination in conjunction with the current layoffs are eligible to receive a payment in exchange for entering into an agreement and release.

The following is a listing of employees (by job title and age) in the above-referenced decisional unit who have been selected for termination and offered a payment in exchange for entering into an agreement and release:

[INSERT LIST OF EMPLOYEES]

The above-selected employees must sign the agreement and release and return it to the Company within the 45-day period prescribed in the agreement and release if they wish to receive the payment set forth in the agreement and release. For employees receiving this Exhibit, once the agreement is signed, the employee has 7 days to revoke the agreement.

The following is a listing of employees (by age) in the above-referenced decisional unit who have not been selected for termination and are not eligible for a payment in exchange for entering into an agreement and release:

[INSERT LIST OF EMPLOYEES]

Exhibit 10.3

EMPLOYMENT AGREEMENT
by and between
Reata Pharmaceuticals, Inc.
and

Michael D. Wortley

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

2. Terms of Employment .

(a) Position and Duties.

(i) During the Employment Period, or any Additional Employment Period, the Executive shall serve as the Chief Legal Officer of the Company and as a Vice President of the Company and, in so doing, shall report to the Chief Executive Officer of the Company or such other person as shall be designated by the Chief Executive Officer. The Executive shall have supervision and control over, and responsibility for, such management and operational functions of the Company currently assigned to such positions, and shall have such other powers and duties (including holding officer positions with one or more subsidiaries of the Company) as may from time to time be prescribed by the Board, so long as such powers and duties are reasonable and customary for the Chief Legal Officer of an enterprise comparable to the Company.

(ii) During the Employment Period, or any Additional Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote full business time to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive ’ s reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period, or any Additional Employment Period, it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions, or (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive ’ s responsibilities as an employee of the Company in accordance with this Agreement.

(b) Compensation .

(i) Base Salary . During the Employment Period, or any Additional Employment Period, the Executive shall receive an annual base salary of $300,000 (the “ Annual Base Salary ”), which shall be paid on a semi-monthly basis in accordance with the customary payroll terms, conditions and practices of the Company. During the Employment Period, or any Additional Employment Period, the Annual Base Salary may be reviewed and may be increased from time to time in accordance with the compensation practices and guidelines of the Company for its executives. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. The term Annual Base Salary as utilized in this Agreement shall refer to the Executive’s Annual Base Salary as so increased.

(v) Expenses . During the Employment Period, or any Additional Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive on behalf of the Company in accordance with the policies, practices and procedures of the Company, which provide an objectively determinable nondiscretionary definition of the expenses eligible for reimbursement. Notwithstanding any provision of this Agreement to the contrary, (A) the amount of expenses eligible to receive reimbur sement during any calendar year shall not affect the amount of expenses for which the Executive is eligible to receive reimbursement during any other calendar year within the Employment Period , or any Additional Employment Period , (B) the r eimbursement of expenses under this Section 2(b)(v) shall be made on or before the last day of the calendar year following the calendar year in which the expense was incurred and (C) the Executive will not receive a payment or other benefit in lieu of reimbursement under this Section 2(b)(v) .

3. Termination of Employment .

(i) commission by the Executive of an act of fraud upon, or willful misconduct toward, the Company;

(iii) the conviction of the Executive of any felony (or a plea of nolo contendere thereto); or

(iv) the Executive’s addiction to alcohol, drugs or any other controlled substance.

(i) a material diminution in the Executive’s base compensation;

(ii) a material diminution in the Executive ’ s authority, duties or responsibilities; provided, however, following a Change in Control, the Executive’s authority, duties and responsibilities shall be deemed to have been materially diminished (even though his authority, duties and responsibilities have not actually been materially diminished) if, within two years after the Change in Control, the Executive is required to report to an executive of the parent company of the Company, or its successor, who is not serving as a senior vice presi d ent ( or in a similar or higher position ) of such parent company ;

(iv) a material diminution in the budget over which the Executive retains authority;

(v) a change in the geographic location at which the Executive must perform services of more than 50 miles in radius from such location as of the date of this Agreement; or

(vi) any other action or inaction that constitutes a material breach by the Company of this Agreement.

(d) Notice of Termination . Any termination by the Company for Cause or without Cause, or by the Executive for Good Reason or without Good Reason, shall be communicated by a Notice of Termination to the other party hereto. For purposes of this Agreement, a “ Notice of Termination ” means a written notice that (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive ’ s employment under the provision so indicated, and (iii) other than with respect to a termination by the Executive for Good Reason, if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date , except for a termination of Executive ’ s employment due to a Disability, shall not be more than 15 days after the giving of such notice or the date the applicable cure period expires, whichever is later ). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive ’ s or the Company ’ s rights hereunder.

4. Obligations of the Company upon Termination .

(ii) t o the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive and/or the Executive ’ s family any other amounts or benefits required to be paid or provided or which the Executive and/or the Executive ’ s family is eligible to receive pursuant to this Agreement and under any plan, program, policy or practice or contract or agreement of the Company ( “ Other Benefits ” ).

forfeited immediately following such six month period. The Executive may elect, and the Company will allow, the payment of the exercise price of any outstanding vested stock options, and the satisfaction of any require d tax withholding with respect to any vested outstanding stock option or other equity award , through the withholding of shares otherwise issuable to the Executive pursuant to the stock option or other equity award.

agreement ; provided, however, the Executive may elect, and the Company will allow, the exercise of any outstanding stock options , and the satisfaction of any required tax withholding with respect to any outstanding stock option or other equity award, through the withholding of shares otherwise issuable to the Executive pursuant to the stock option or other equity award.

(iv) To the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive and/or the Executive’s family the Other Benefits.

(ii) The Company sells, leases, or exchanges or agrees to sell, lease, or exchange more than 50% of its assets to any other person or entity (other than a wholly owned subsidiary of the Company);

(iii) The Company is to be dissolved and liquidated (in a dissolution taxed under Section 331 of the Internal Revenue Code of 1986, as amended (the “ Code ”));

(iv) Any person or entity, including a “ group ” as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended , acquires or gains ownership or control (including, without limitation, power to vote) , directly, by merger or otherwise, of more than 50% of the outstanding shares of the Company ’ s voting stock (based upon voting power) and as a result of such acquisition, the stockholders holding a majority of the capital stock of the Company receive cash or marketable securities for their shares of capital stock ; or

(v) As a result of or in connection with a contested election of directors, the persons who were directors before such election will cease to constitute a majority of the Board.

will be made and (B ) state and local income taxes at the highest rate in effect in the state or locality in which the Gross-Up Payment would be subject to state or local tax, net of the maximum reduction in federal income tax that could be obtained from deduction of such state and local taxes. The determination of whether an Excise Tax would be imposed, the amount of such Excise Tax, and the calculation of the amounts referred to in this Section 4( g ) will be made at the expense of the Company by the Company ’ s regular independent accounting firm (the “ Accounting Firm ” ), which shall provide detailed supporting calculations. Any determination by the Accounting Firm will be binding upon the Company and the Executive. The Gross-Up Payment will be paid to the Executive as soon as administratively practicable following the later of (i) the date Executive is required to pay the excise tax imposed by Section 4999 of the Code , or (ii) in the event the Executive is determined, in accordance with the methods specified in the regulations issued under Section 409A of the Code , to be a “ specified employee ” (within the meaning of Section 409A(a)(2)(B)(i) of the Code) of the Company at the time of the Executive ’ s “ separation from service ” (within the meaning of Section 409A(a)(2)(A)(i) of the Code and the applicable regulations and administrative guidance issued thereunder) , the first day of the seventh month after the date of the Executive’s “ separation from service ” or, if earlier, the date of death of Executive . In the event that the Excise Tax is later determined by the Accounting Firm or pursuant to any proceeding or negotiations with the Internal Revenue Service to exceed the Gross-Up Payment at the time the payment is made under this Section 4(g ) (including, but not limited to, by reason of any payment the existence or amount of which cannot be determined at the time of such payment), the Company shall make an additional payment in respect of such excess (plus any interest or penalty payable with respect to such excess) at the time that the amount of such excess is finally determined. In the event that the Excise Tax is subsequently determined by the Accounting Firm or pursuant to any proceeding or negotiations with the Internal Revenue Service to be less than the Gross-Up Payment at the time payment is made under this Section 4(g ) , the Executive shall repay to the Company, at the time that the amount of such reduction in the Excise Tax is finally determined, the portion of such prior payment that would not have been paid if such Excise Tax had been applied in initially calculating such payment, plus interest on the amount of such repayment at the rate provided in section 1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event that any portion of the payment made hereunder that is to be refunded to the Company has been paid to any Federal, state or local tax authority, repayment thereof shall not be required until actual refund or credit of such portion has been made to the Executive, and interest payable to the Company shall not exceed interest received or credited to the Executive by such tax authority for th e period it held such portion. The Gross-Up Payment will be made in a manner that complies with Treasury Regulation § 1.409A-3(i)(1)(v).

of the Code) of the Company at the time of the Executive ’ s “ separation from service ” (within the meaning of Section 409A(a)(2)(A)(i) of the Code and the applicable regulations and administrative guidance issued thereunder) then, in-lieu of providing Welfare Benefit Continuation pursuant to this Section 4 with respect to benefits that would not constitute medical expenses deductible under section 213 of the Code (disregarding the requirement of section 213(a) of the Code that the deduction is available only to the extent that such expenses exceed 7.5 percent of adjusted gross income) (“ Non-Medical Continuation Benefits ”) , during the six month period following Executive’s “separation from service,” the Company shall pay to the Executive an amount equal to the Company-provided costs of such Non-Medical Continuation Benefits in a single lump sum payment on the first day of the seventh month following the Executive’s “separation from service.” Nothing in this Section 4(h) will impact the obligation of the Company to provide Welfare Benefit Continuation as provided in this Section 4 with respect to Welfare Benefits other than Non-Medical Continuation Benefits or to provide Non-Medical Continuation Benefits following the six month period following Executive’s “separation from service.” This Section 4( h ) will have no effect with respect to benefits payable pursuant to this Agreement due to the Executive’s Disability.

5. Restrictive Covenants .

(a) Confidential Information; Assignment of Rights to Intellectual Property .

parties that the Executive received during the course of and as a result of the Executive’s emplo yment with the Company and its Affiliate s. No information otherwise in the public domain (other than by an act of the Executive in violation hereof) shall be considered Confidential Information and Trade Secrets. The Executive understands that the restrict ions set forth in this Section 5(a)(i) shall continue to apply following the Executive’s termination of employment with the Company , regardless of the reason for such termination.

(b) Non-Competition; Non-Solicitation .

(ii) The restrictions in this Section 5(b) shall be in addition to any restrictions imposed upon the Executive by statute or at common law.

6. Full Settlement . The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement. Neither the Executive nor the Company shall be liable to the other party for any damages in addition to the amounts payable under Section 4 hereof arising out of the termination of the Executive’s employment prior to the end of the Employment Period, or any Additional Employment Period; provided , however , that the Company shall be entitled to seek damages for any breach of the noncompetition provisions of Section 5 hereof or of the Employee Confidentiality, Nondisclosure, Intellectual Property and Nonsolicitation Agreement, dated April 1 , 2015 by and between the Executive and the Company.

7. Successors .

(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

9. Miscellaneous .

If to the Executive :		Michael D. Wortley
		7975 Caruth Court
		Dallas, Texas 75225

If to the Company :		Reata Pharmaceuticals, Inc.
		2801 Gateway Drive, Suite 150
		Irving, Texas 75063
		Attention: Chief Financial Officer

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

(d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(ii) The arbitration hearing will in no event take place more than 180 days after the appointment of the third arbitrator.

(iii) The mediation and the arbitration will take place in Irving, Texas unless otherwise unanimously agreed to by the parties.

(l) This Agreement may be executed in two or more counterparts.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Executive has hereunto set the Executive ’ s hand and, pursuant to the authorization from its Board, the Company has caused this Agreement to be executed in its name on its behalf, as of the date first written above.

	EXECUTIVE

			/s/ Michael D. Wortley
			Michael D. Wortley

	REATA PHARMACEUTICALS, INC.

	By:		/s/ J. Warren Huff
	Name:		J. Warren Huff
	Title:		Chief Executive Officer

EXHIBIT A

S-1

EXHIBIT A

RELEASE

10. Definitions .

12. Release of Claims .

(c) In furtherance of this Release, you promise not to bring any Claims against any of the Released Parties in or before any court or arbitral authority.

14. ADEA Rights . You further acknowledge that:

(d) You have seven (7) days after signing this Release to revoke it. This Release will not become effective or enforceable until the revocation period has expired. Any notice of revocation of the Release is effective only if received by the Chief Financial Officer , in care of the Company at 2801 Gateway Drive, Suite 150, Irving, Texas, 75063, in writing by the close of business at 5:00 p.m. Central Time on the seventh day after your signing of this Release . If you revoke your acceptance of this Release pursuant to this Section 5(d) , the Company will not provide you with any of the consideration described in Section 2 above and all other terms of this Release will become null and void.

15. Applicable Law . This Release shall be construed and interpreted pursuant to the laws of the State of Texas without regard to its choice of law rules.


	Name:


	Date:

Accepted and Agreed:

	REATA PHARMACEUTICALS, INC.

	By:
	Name:
	Title:

	Date:

ANNEX A

ATTACHMENT TO SEVERANCE AGREEMENT AND GENERAL RELEASE OF CLAIMS

[INSERT LIST OF EMPLOYEES]

Exhibit 10.4

EMPLOYMENT AGREEMENT
by and between
Reata Pharmaceuticals, Inc.
and

Dawn Carter Bir

THIS EMPLOYMENT AGREEMENT (the “ Agreement ”) is made and entered into as of the sixth (6 ^th ) day of September 2016, by and between Reata Pharmaceuticals, Inc., a Delaware corporation (together with its successors and assigns permitted hereunder, the “ Company ”), and Dawn Carter Bir (the “ Executive ”).

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

1. Employment Period . Subject to earlier termination pursuant to Section 3 , the Company hereby agrees to employ the Executive, and the Executive hereby agrees to be employed by the Company, in accordance with the terms and provisions of this Agreement, for the period commencing on the date of this Agreement (the “ Effective Date ”) and ending at the close of business on September 5 ^th , 2020 (the “ Employment Period ”). Thereafter, such term of employment shall be extended automatically for successive one-year periods (such extended term, the “ Additional Employment Period ”) unless the Company or Executive provides the other with written notice no less than 30 days prior to the date the Employment Period or the Additional Employment Period, as applicable, would otherwise end either (i) declining to extend such term of employment, or (ii) requesting that the terms of this Agreement are renegotiated prior to the Agreement’s renewal. If the parties fail to enter into the renegotiation process within 30 days of receipt of such notice, this Agreement will be extended automatically as if such notice was not given.

2. Terms of Employment .

(a) Position and Duties.

(i) During the Employment Period, or any Additional Employment Period, the Executive shall serve as the Chief Commercial Officer of the Company and as a Vice President of the Company and, in so doing, shall report to the Chief Executive Officer of the Company or such other person as shall be designated by the Chief Executive Officer. The Executive shall have supervision and control over, and responsibility for, such management and operational functions of the Company currently assigned to such positions, and shall have such other powers and duties (including holding officer positions with one or more subsidiaries of the Company) as may from time to time be prescribed by the Board, so long as such powers and duties are reasonable and customary for the Chief Commercial Officer of an enterprise comparable to the Company.

(ii) During the Employment Period, or any Additional Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote full business time to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive ’ s reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period, or any Additional Employment Period, it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions, or (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive ’ s responsibilities as an employee of the Company in accordance with this Agreement.

(b) Compensation .

(i) Base Salary . During the Employment Period, or any Additional Employment Period, the Executive shall receive an annual base salary of $325,000 (the “ Annual Base Salary ”), which shall be paid on a semi-monthly basis in accordance with the customary payroll terms, conditions and practices of the Company. During the Employment Period, or any Additional Employment Period, the Annual Base Salary may be reviewed and may be increased from time to time in accordance with the compensation practices and guidelines of the Company for its executives. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. The term Annual Base Salary as utilized in this Agreement shall refer to the Executive’s Annual Base Salary as so increased.

(v) Expenses . During the Employment Period, or any Additional Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive on behalf of the Company in accordance with the policies, practices and procedures of the Company, which provide an objectively determinable nondiscretionary definition of the expenses eligible for reimbursement. Notwithstanding any provision of this Agreement to the contrary, (A) the amount of expenses eligible to receive reimbur sement during any calendar year shall not affect the amount of expenses for which the Executive is eligible to receive reimbursement during any other calendar year within the Employment Period , or any Additional Employment Period , (B) the r eimbursement of expenses under this Section 2(b)(v) shall be made on or before the last day of the calendar year following the calendar year in which the expense was incurred and (C) the Executive will not receive a payment or other benefit in lieu of reimbursement under this Section 2(b)(v) .

3. Termination of Employment .

(i) commission by the Executive of an act of fraud upon, or willful misconduct toward, the Company;

(iii) the conviction of the Executive of any felony (or a plea of nolo contendere thereto); or

(iv) the Executive’s addiction to alcohol, drugs or any other controlled substance.

(i) a material diminution in the Executive’s base compensation;

(iii) a material diminution in the authority, duties or responsibilities of the supervisor to whom the Executive is required to report ; provided, however, that , except as provided in Section 3(c)(ii) , a change in the person to whom the Executive shall report pursuant to Section 2(a)(i) shall not be or constitute Good Reason ;

(iv) a material diminution in the budget over which the Executive retains authority;

(v) a change in the geographic location at which the Executive must perform services of more than 50 miles in radius from such location as of the date of this Agreement; or

(vi) any other action or inaction that constitutes a material breach by the Company of this Agreement.

for a termination of Executive ’ s employment due to a Disability, shall not be more than 15 days after the giving of such notice or the date the applicable cure period expires, whichever is later ). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive ’ s or the Company ’ s rights hereunder.

4. Obligations of the Company upon Termination .

(b) Death or Disability prior to , or more than two years after , a Change in Control . Upon the Executive ’ s death or Disability during the Employment Period, or any Additional Employment Period, but prior to the occurrence of a Change in Control or more than two years after the occurrence of a Change in Control , the Company shall have no further payment obligations to the Executive or his legal representatives under this Agreement, other than for (i) payment of the Accrued Obligations (within 15 days following the Date of Termination) and Other Benefits; (ii) payment of a lump sum cash amount equal to the Executive’s current Annual Base Salary, payable on the next payroll date immediately following the eighth day following the delivery to the Company of a properly executed Release in accordance with Section 4(f) of this Agreement; (iii) Welfare Benefit Continuation as defined, and pursuant to the terms and in the manner described, in Section 4(d)(ii) up to 12 month, rather than the 24 month, anniversary of the Date of Termination; an d ( i v ) subject to Section 4(f) , all equity awards granted by the Company to, or otherwise held by, the Executive shall immediately vest in full and any repurchase provisions (other than fair market value repurchase provisions) shall lapse and may be exercised and/or settled in accordance with the terms of the applicable plan or award agreement ; provided, however, the Executive may elect, and the Company will allow, the payment of the exercise price of any outstanding stock options , and the satisfaction of any required tax withholding with respect to any outstanding stock option or other equity award , through the withholding of shares otherwise issuable to the Executive pursuant to the stock option or other equity award .

(c) Certain Terminations more than six months prior to, or more than two years after, a Change in Control by the Company other than for Cause or by Executive for Good Reason . If, during the Employment Period, or any Additional Employment Period, but more than six months prior to, or more than two years after, the occurrence of a Change in Control, the Executive’s employment with the Company is terminated by the Company for any reason other than for Cause (and not due to death or Disability) or by the Executive for Good Reason, the Executive will be entitled to (i) the Accrued Obligations and Other Benefits, payable in accordance with Section 4(a)(i) and (ii) , (ii) subject to Sections 4(f) and (h) , a lump sum cash amount equal to the Executive’s then current Annual Base Salary, payable on the next payroll date immediately following the eighth day following the Executive’s delivery to the Company of a properly executed Release in accordance with Section 4(f) of this Agreement, and (iii) Welfare Benefit Continuation as defined, and pursuant to the terms and in the manner described, in Section 4(d)(ii) up to 12 month, rather than the 24 month, anniversary of the Date of Termination. In addition, notwithstanding the provisions of any applicable plan or agreement and subject to Section 4(f) , equity awards held by the Executive that otherwise would have been forfeited will continue to remain outstanding, unvested (and will not continue vesting) and subject to forfeiture for a period of six months following the Date of Termination (such equity awards, the “ Unvested Equity Awards ”). If a Change in Control occurs during such six month period the Unvested Equity Awards will vest in accordance with Section 4(d)(v) . If a Change in Control does not occur during such six month period, the Unvested Equity Awards will be forfeited immediately following such six month period. The Executive may elect, and the Company will allow, the payment of the exercise price of any outstanding vested stock options, and the satisfaction of any required tax withholding with respect to any vested outstanding stock option or other equity award, through the withholding of shares otherwise issuable to the Executive pursuant to the stock option or other equity award.

(d) Certain Terminations within six months prior to, or within two years following , a Change in Control . In the event that the Executive ’ s employment is terminated by the Company for any reason other than Cause or by the Executive for Good Reason or the Executive dies or incurs a Disability, in each case, during the Employment Period, or any Additional Employment Period , and such termination occurs within six months prior to (excluding death or Disability) , or within two years after , a Change in Control , the following provisions shall apply and Sections 4(b) and (c ) shall not be applicable until Section 4(d) is no longer applicable :

(iv) To the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive and/or the Executive ’ s family the Other Benefits.

(ii) The Company sells, leases, or exchanges or agrees to sell, lease, or exchange more than 50% of its assets to any other person or entity (other than a wholly owned subsidiary of the Company);

(iii) The Company is to be dissolved and liquidated (in a dissolution taxed under Section 331 of the Internal Revenue Code of 1986, as amended (the “ Code ”));

(iv) Any person or entity, including a “ group ” as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended , acquires or gains ownership or control (including, without limitation, power to vote) , directly, by merger or otherwise, of more than 50% of the outstanding shares of the Company ’ s voting stock (based upon voting power) and as a result of such acquisition, the stockholders holding a majority of the capital stock of the Company receive cash or marketable securities for their shares of capital stock ; or

(v) As a result of or in connection with a contested election of directors, the persons who were directors before such election will cease to constitute a majority of the Board.

5. Restrictive Covenants .

(a) Confidential Information; Assignment of Rights to Intellectual Property .

(b) Non-Competition; Non-Solicitation .

(i) The Company hereby makes a binding promise not conditioned upon continued employment to provide the Executive with Confidential Information and Trade Secrets above and beyond any Confidential Information and Trade Secrets the Executive may have previously received. In order in part to protect the Confidential Information and Trade Secrets, and as part of the consideration for the payments described in Section 4 of this Agreement , the Company and the Executive agree to the provisions of this Section 5(b) . As a part of the employment relationship, the Executive learned of and the Company disclosed to the Executive Confidential Information and Trade Secrets. Accordingly, the Executive hereby agree s that , for one year after the Executive cease s to provide services to the Company, the Executive will not:

(ii) The restrictions in this Section 5(b) shall be in addition to any restrictions imposed upon the Executive by statute or at common law.

6. Full Settlement . The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement. Neither the Executive nor the Company shall be liable to the other party for any damages in addition to the amounts payable under Section 4 hereof arising out of the termination of the Executive’s employment prior to the end of the Employment Period, or any Additional Employment Period; provided , however , that the Company shall be entitled to seek damages for any breach of the noncompetition provisions of Section 5 hereof or of the Employee Confidentiality, Nondisclosure, Intellectual Property and Nonsolicitation Agreement, dated September 6 ^th , 2016 by and between the Executive and the Company.

7. Successors .

(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

9. Miscellaneous .

If to the Executive :		Dawn Carter Bir
		4817 Rangewood Drive
		Flower Mound, Texas 75028

If to the Company :		Reata Pharmaceuticals, Inc.
		2801 Gateway Drive, Suite 150
		Irving, Texas 75063
		Attention: Chief Financial Officer

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

(d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(ii) The arbitration hearing will in no event take place more than 180 days after the appointment of the third arbitrator.

(iii) The mediation and the arbitration will take place in Irving , Texas unless otherwise unanimously agreed to by the parties.

(i) The parties hereto agree that, in the event of any conflict or inconsistency between this Agreement and the terms of any equity award agreement, this Agreement shall govern and shall supersede the terms of the equity award agreement. The parties hereto agree that, in the event of any conflict or inconsistency between this Agreement and the plan document governing any equity award, the terms of the plan document shall control and, if necessary, this Agreement shall be deemed amended so as to carry out the purpose and intent of the plan document. In the event of any inconsistency between any provision of this Agreement and any provision of any employee handbook, personnel manual, program, policy, or arrangement of the Company or any of its Affiliates, or any provision of any agreement, plan, or corporate governance document of any of them (other than the terms of the plan document governing any equity award), the provisions of this Agreement shall control unless the Executive otherwise agrees in a signed writing that expressly refers to the provision whose control the Executive is waiving. The Company agrees not to impose any restrictions, enforceable by injunction, on Executive’s post-employment activities, other than those expressly set forth in this Agreement.

(l) This Agreement may be executed in two or more counterparts.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Executive has hereunto set the Executive ’ s hand and, pursuant to the authorization from its Board, the Company has caused this Agreement to be executed in its name on its behalf, as of the date first written above.

	EXECUTIVE

			/s/ Dawn Carter Bir
			Dawn Carter Bir

	REATA PHARMACEUTICALS, INC.

	By:		/s/ J. Warren Huff
	Name:		J. Warren Huff
	Title:		Chief Executive Officer

EXHBIT A

S-1

EXHIBIT A

RELEASE

10. Definitions .

12. Release of Claims .

(c) In furtherance of this Release, you promise not to bring any Claims against any of the Released Parties in or before any court or arbitral authority.

14. ADEA Rights . You further acknowledge that:

(d) You have seven (7) days after signing this Release to revoke it. This Release will not become effective or enforceable until the revocation period has expired. Any notice of revocation of the Release is effective only if received by the Chief Financial Officer , in care of the Company at 2801 Gateway Drive, Suite 150, Irving, Texas, 75063, in writing by the close of business at 5:00 p.m. Central Time on the seventh day after your signing of this Release . If you revoke your acceptance of this Release pursuant to this Section 5(d) , the Company will not provide you with any of the consideration described in Section 2 above and all other terms of this Release will become null and void.

15. Applicable Law . This Release shall be construed and interpreted pursuant to the laws of the State of Texas without regard to its choice of law rules.


	Name:


	Date:

Accepted and Agreed:

	REATA PHARMACEUTICALS, INC.

	By:
	Name:
	Title:

	Date:

ANNEX A

ATTACHMENT TO SEVERANCE AGREEMENT AND GENERAL RELEASE OF CLAIMS

[INSERT LIST OF EMPLOYEES]

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, J. Warren Huff, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Reata Pharmaceuticals, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

( b )

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c )

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 14, 2016	By:	/s/ J. Warren Huff
		J. Warren Huff
		Chief Executive Officer
		(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jason D. Wilson, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Reata Pharmaceuticals, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have:

(a)

(b)

( c )

5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 14, 2016	By:	/s/ Jason D. Wilson
		Jason D. Wilson
		Chief Financial Officer
		(Principal Financial Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Reata Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Warren Huff, as Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: November 14, 2016	By:	/s/ J. Warren Huff
		J. Warren Huff
		Chief Executive Officer
		(Principal Executive Officer)

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Reata Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jason D. Wilson, Chief Financial Officer, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: November 14, 2016	By:	/s/ Jason D. Wilson
		Jason D. Wilson
		Chief Financial Officer
		(Principal Financial Officer)