10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________________________________________________

FORM 10-Q

(Mark One) 

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

For the quarterly period ended June 30, 2014

or

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

For the transition period from                to

Commission File Number 001-35119

___________________________________________________________

Ocera Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

DELAWARE	63-1192270
(State or other jurisdiction of incorporation	(I.R.S. Employer Identification No.)
or organization)

525 University Avenue, Suite 610
Palo Alto, CA	94301
(Address of principal executive offices)	(Zip Code)

(650) 475-0150

(Registrant’s telephone number, including area code)

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 x  No o

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 x No o

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 o	Accelerated Filer o
Non-Accelerated Filer o	Smaller Reporting Company x
(Do not check if a smaller 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 x

The number of shares outstanding of the registrant’s Common Stock as of July 31, 2014, was 19,741,758.

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FORWARD-LOOKING STATEMENTS 

This Quarterly Report on Form 10-Q contains forward-looking statements that involve 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 are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or the negative of these words or other comparable terminology.

These forward-looking statements include, but are not limited to, statements about:

• the progress, timing and amount of expenses associated with our research, development and commercialization activities; 

• the timing, design, implementation and success of our clinical trials for OCR-002; 

• our ability to obtain U.S. and foreign regulatory approval for OCR-002 and the ability of OCR-002 to meet existing or future regulatory standards; 

• our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others; 

• our expectations regarding federal, state and foreign regulatory requirements; 

• the therapeutic benefits, effectiveness and safety of OCR-002; 

• the accuracy of our estimates of the size and characteristics of the markets that may be addressed by OCR-002; 

• our ability to manufacture sufficient amounts of OCR-002 for clinical trials and commercialization activities; 

• our intention to seek, and our ability to establish strategic collaborations or partnerships for the development or sale of OCR-002 and the effectiveness of such collaborations or partnerships; 

• our expectations as to future financial performance, expense levels and liquidity sources; 

• the timing of commercializing OCR-002; 

• our ability to compete with other companies that are or may be developing or selling products that are competitive with OCR-002; 

• anticipated trends and challenges in our potential markets; 

• our ability to attract and retain key personnel; and 

• other risks and uncertainties, including those described in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013.

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 listed under Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013. Given these uncertainties, you should not place undue reliance on these forward-looking statements. 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.

Unless the context requires otherwise, references in this Quarterly Report to “we,” “us” and “our” refer to Ocera Therapeutics, Inc. and its subsidiaries.

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OCERA THERAPEUTICS, INC.

INDEX

		Page
Part I.	Financial Information	4
Item 1	Unaudited Consolidated Financial Statements	4
	Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013	4
	Consolidated Statements of Operations and Comprehensive Loss for the three and six month periods ended June 30, 2014 and 2013	5
	Consolidated Statements of Cash Flows for the six month periods ended June 30, 2014 and 2013	6
	Notes to Consolidated Financial Statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4	Controls and Procedures	22
Part II.	Other Information	23
Item 1	Legal Proceedings	23
Item 1A	Risk Factors	23
Item 2	Unregistered Sales of Equity Securities	23
Item 3	Defaults Under Senior Securities	23
Item 4	Mine Safety Disclosures	23
Item 5	Other Information	23
Item 6	Exhibits	24
	Signatures	25

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PART I - FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

Ocera Therapeutics, Inc. Consolidated Balance Sheets (In Thousands, Except Share and Per Share Amounts)
	June 30,		December 31,
	2014		2013
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	12,507	$	15,533
Short-term investments, available-for-sale	25,611		30,167
Accounts receivable	33		93
Prepaid expenses and other current assets	635		470
Assets of discontinued operations	—		3,029
Current assets	38,786		49,292
Property and equipment, net	75		59
Long-term investments	—		1,513
Other non-current assets	87		26
Intangible assets, net	253		335
Goodwill	595		595
Total assets	$	39,796	$	51,820
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	1,306	$	1,282
Accrued liabilities	1,900		1,902
Liabilities of discontinued operations	95		3,503
Total current liabilities	3,301		6,687
Other liabilities	—		1
Total liabilities	3,301		6,688
Commitments and contingencies (Note 8)
Stockholders' equity:
Preferred Stock - $0.00001 par value, 5,000,000 shares authorized and no shares issued or outstanding at June 30, 2014 and December 31, 2013.	—		—
Common stock - $0.00001 par value, 100,000,000 shares authorized, 15,541,758 and 15,300,214 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively.	—		—
Additional paid-in capital	129,265		126,615
Accumulated other comprehensive income	4		3
Accumulated deficit	(92,774)		(81,486)
Total stockholders' equity	36,495		45,132
Total liabilities and stockholders' equity	$	39,796	$	51,820

See the accompanying notes to the unaudited consolidated financial statements.

4

Ocera Therapeutics, Inc. Consolidated Statements of Operations and Comprehensive Loss (In Thousands, Except Share and Per Share Amounts) (unaudited)
	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenue:
Royalty revenue	$	33		$	—		$	78		$	—
Total revenue	33			—			78			—
Operating expenses:
Research and development	4,826			365			7,292			434
General and administrative	2,421			1,652			5,154			2,223
Amortization of intangibles	41			—			82			—
Impairment of intangibles	—			—			0			—
Total operating expenses	7,288			2,017			12,528			2,657
Other income (expense):
Interest and other income	12			—			25			—
Interest and other expense	—			(77		)	—			(173		)
Change in fair value of warrant liability	—			7			—			12
Total other income (expense), net	12			(70		)	25			(161		)
Net loss from continuing operations	(7,243		)	(2,087		)	(12,425		)	(2,818		)
Net income from discontinued operations (including gain on disposal of $1,149 for the six months ended June 30, 2014)	20			—			1,137			—
Net loss	$	(7,223	)	$	(2,087	)	$	(11,288	)	$	(2,818	)
Net loss per share:
Net loss per share from continuing operations, basic and diluted	$	(0.46	)	$	(3.24	)	$	(0.80	)	$	(4.40	)
Net income per share from discontinued operations, basic and diluted	—			—			0.07			—
Net loss per share, basic and diluted	$	(0.46	)	$	(3.24	)	$	(0.73	)	$	(4.40	)
Weighted average number of shares used to compute net loss per share of common stock, basic and diluted	15,539,053			643,674			15,480,469			640,465
Other comprehensive loss:
Net loss	$	(7,223	)	$	(2,087	)	$	(11,288	)	$	(2,818	)
Unrealized gain (loss) on investments	(1		)	—			1			—
Comprehensive loss	$	(7,224	)	$	(2,087	)	$	(11,287	)	$	(2,818	)

See the accompanying notes to the unaudited consolidated financial statements.

5

Ocera Therapeutics, Inc. Consolidated Statements of Cash Flows (In Thousands) (unaudited)
	Six Months Ended June 30,
	2014			2013
Operating activities
Net loss	$	(11,288	)	$	(2,818	)
Adjustments to reconcile net loss to net cash used in operating activities:
Net income from discontinued operations	(1,137		)	—
Depreciation	20			5
Amortization of intangibles	82			—
Stock based compensation	2,252			32
Change in valuation of warrant liability	—			(12		)
Accretion of premium on investment securities	212			80
Debt discount, net and noncash interest expense	—			93
Changes in operating assets and liabilities:
Accounts receivable	60			—
Prepaid expenses and other assets	(139		)	(1		)
Accounts payable	11			778
Accrued liabilities	(90		)	252
Net cash used in continuing operating activities	(10,017		)	(1,591		)
Net cash used in discontinued operating activities	(407		)	—
Net cash used in operating activities	(10,424		)	(1,591		)
Investing activities
Purchases of property and equipment	(23		)	(2		)
Purchase of investments	(9,187		)	—
Sale and maturities of investments	15,045			—
Net cash provided by (used in) continuing investing activities	5,835			(2		)
Net cash provided by discontinued investing activities	1,165			—
Net cash provided by (used in) investing activities	7,000			(2		)
Financing activities
Proceeds from issuance of common stock	398			20
Net cash provided by continuing financing activities	398			20
Net decrease in cash and cash equivalents	(3,026		)	(1,573		)
Cash and cash equivalents—beginning of period	15,533			2,303
Cash and cash equivalents—end of period	$	12,507		$	730
Supplemental schedule of noncash investing and financing activities
Cashless exercise of stock options	$	22		$	—
Acquisition of fixed assets with accounts payable	$	13		$	—
Deferred offering costs in accrued expenses and accounts payable	$	87		$	—

See the accompanying notes to the unaudited consolidated financial statements.

6

Ocera Therapeutics, Inc.

Notes to Unaudited Consolidated Financial Statements

1. The Company

Ocera Therapeutics, Inc. (the "Company") is a clinical stage biopharmaceutical company focused on the development and commercialization of OCR-002 (ornithine phenylacetate). OCR-002 is an ammonia scavenger and has been granted orphan drug designation and Fast Track status from the U.S. Food and Drug Administration (FDA) for the treatment of hyperammonemia and resultant hepatic encephalopathy in patients with acute liver failure and acute or chronic liver disease.

On July 15, 2013, Terrapin Acquisition, Inc., a Delaware corporation (“Merger Sub”) and wholly owned subsidiary of Tranzyme, Inc., a Delaware corporation (“Tranzyme”), completed its merger (the “Merger”) with and into Ocera Therapeutics, Inc., a private Delaware corporation (“Private Ocera”).  Private Ocera is considered the acquiring company in the Merger for accounting purposes.  In connection with the Merger, the combined company changed its name to Ocera Therapeutics, Inc. and the name of Private Ocera was changed to Ocera Subsidiary, Inc. 

As of June 30, 2014, the Company has incurred losses since inception of $92.8 million. The Company expects to continue to incur losses and that it will require additional financial resources to advance OCR-002 to either commercial stage or liquidity events.

2. Summary of Significant Accounting Policies

Basis of Presentation

The Company has a limited operating history and the sales and income potential of the Company's business and addressable market are unproven. The Company has experienced net losses each year since its inception and, as of June 30, 2014, had an accumulated deficit of $92.8 million. The Company anticipates that it will continue to incur net losses into the foreseeable future as it continues the development and commercialization of its lead drug candidate OCR-002 and expands its corporate infrastructure. Based on the Company's operating plan, the Company believes its current working capital is sufficient to fund its operations through at least the next twelve months.

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with United States of America generally accepted accounting principles ("U.S. GAAP") for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission. The financial statements and related notes do not include all information and footnotes required by U.S. GAAP for annual reports. This quarterly report should be read in conjunction with the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2013.

Unaudited Interim Financial Information

The accompanying interim consolidated financial statements and related disclosures are unaudited, have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the results of operations for the periods presented. The year-end balance sheet was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The consolidated results of operations for any interim period are not necessarily indicative of the results to be expected for the full year or for any other future year or interim period.

Use of Estimates

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

Discontinued Operations

On September 11, 2013, the Board of Directors approved a restructuring plan related to the operations of Tranzyme Pharma Inc. and its Sherbrooke, Quebec facility ("Tranzyme Pharma"), whereby the Company closed the operations of the facility effective as of November 11, 2013. On December 13, 2013, the Company entered into a Technology Transfer and License Agreement to sell the Company’s MATCH discovery platform and license the related intellectual property rights.

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The Company concluded that since Tranzyme Pharma's operations and the MATCH discovery platform comprised a component with distinct operations and cash flows that would be eliminated from ongoing operations, and the Company would not have significant involvement after the disposal, these components would be accounted for as discontinued operations. The results of operations of the components to be disposed of, related restructuring costs and gain on disposal of assets have been classified as net income from discontinued operations from their date of acquisition on July 15, 2013 through June 30, 2014. The assets and liabilities of Tranzyme Pharma have been classified as assets and liabilities, respectively, of discontinued operations. Unless noted otherwise, discussion in these notes to the financial statements pertain to our continuing operations.

Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update, or ASU, No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (topic 360); Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU 2014-08 provides additional requirements to classify a disposal of a component of an entity or a group of components of an entity in discontinued operations only if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014, with an option for early adoption. The Company intends to adopt this guidance at the beginning of our first quarter of fiscal year 2015, and does not expect the adoption of this standard will have a material impact on the Company’s financial statements.

In June 2014, the FASB issued Accounting Standards Update, or ASU, No. 2014-10, Development Stage Entities (Topic 915). ASU 2014-10 removes the distinction between development stage entities and other reporting entities in U.S. GAAP and eliminates the requirement to label financial statements as those of a development stage entity and eliminates the requirement to present inception to date information in the statements of income, cash flows and shareholder equity. The guidance is applied retroactively and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014, with an option for early adoption. The Company early adopted this guidance in the second quarter of 2014, and as a result, has removed the label “A Development Stage Company” from its financial statements and accompanying notes and eliminated the inception to date information from the Consolidated Statements of Operations and Comprehensive Loss and Consolidated Statements of Cash Flows. Other than presentation, the adoption of this standard did not have a material impact on the Company’s financial statements.

3. Fair Value Measurements

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis as of June 30, 2014, and December 31, 2013, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value. As a basis for categorizing inputs, the Company uses a three-tier fair value hierarchy, which prioritizes the inputs used to measure fair value from market-based assumptions to entity specific assumptions:

Level 1: Quoted prices in active markets for identical assets or liabilities;

Level 2: Inputs, other than level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3: Unobservable inputs that are supported by little or no market activity, which require the Company to develop its own assumptions.

8

Assets measured at fair value on a recurring basis as of June 30, 2014 are as follows (in thousands):

	Balance as of June 30, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	$	9,427	$	9,427	$	—	$	—
Commercial paper	7,499		—		7,499		—
Corporate debt securities	19,612		—		19,612		—
Total assets	$	36,538	$	9,427	$	27,111	$	—

Assets measured at fair value on a recurring basis as of December 31, 2013 are as follows (in thousands):

	Balance as of December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	$	5,774	$	5,774	$	—	$	—
Commercial paper	15,246		—		15,246		—
Corporate debt securities	20,884		—		20,884		—
Total assets	$	41,904	$	5,774	$	36,130	$	—

4. Balance Sheet Components

Investments

The following table summarizes the Company's available for sale investments as of June 30, 2014 (in thousands).

	Maturity (in Years)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Short-term investments:
Commercial paper	1 or less	$	5,996	$	3	$	—	$	5,999
Corporate debt securities	1 or less	19,611		1		—		19,612
Total investments		$	25,607	$	4	$	—	$	25,611

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The following table summarizes the Company's available for sale investments as of December 31, 2013 (in thousands).

	Maturity (in Years)	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Short-term investments:
Commercial paper	1 or less	$	15,232	$	14	$	—		$	15,246
Corporate debt securities	1 or less	14,930		—		(9		)	14,921
Total		30,162		14		(9		)	30,167
Long-term investments:
Corporate debt securities	More than 1	1,515		—		(2		)	1,513
Total		1,515		—		(2		)	1,513
Total investments		$	31,677	$	14	$	(11	)	$	31,680

At each reporting date, the Company performs an evaluation of impairment to determine if the unrealized losses are other-than-temporary. For debt securities, management determines whether it intends to sell the impaired securities, and if there is no intent or expected requirement to sell, management considers whether it is likely that the amortized cost will be recovered. The Company does not consider unrealized losses on its debt investment securities to be credit-related. These unrealized losses relate to changes in interest rates and market spreads subsequent to purchase. The Company has not made a decision to sell securities with unrealized losses and believes it is more likely than not it would not be required to sell such securities before recovery of its amortized cost. There have been no other than temporary losses recognized in earnings.

Property and Equipment

Property and equipment, net were as follows (in thousands):

	Useful Life	June 30,			December 31,
	(in years)	2014			2013
Computer equipment and software	3 years	$	43		$	40
Office furniture and equipment	5 years	51			43
Construction in progress	5 years	25			—
		119			83
Accumulated depreciation		(44		)	(24		)
Property and equipment, net		$	75		$	59

Total depreciation expense was $10,000 and $2,000 for the three months ended June 30, 2014 and 2013, respectively, and $20,000 and $5,000 for the six months ended June 30, 2014 and 2013, respectively. 

Acquired intangible assets

The net book value of acquired intangible assets were as follows (in thousands):

	June 30,			December 31,
Customer Agreements:	2014			2013
Carrying value	$	410		$	410
Accumulated amortization	(157		)	(75		)
Intangible assets, net	$	253		$	335
Weighted average remaining life (in years)	1.5			2.0

Total amortization expense was $41,000 and $0 for the three months ended June 30, 2014 and 2013, respectively, and $82,000 and $0 for the six months ended June 30, 2014 and 2013, respectively. 

The estimated future amortization expense of purchased intangible assets as of June 30, 2014 is $0.1 million and $0.2 million for the six-months and year ended December 31, 2014 and 2015 respectively.

10

Accrued Liabilities

Accrued liabilities were as follows (in thousands):

	June 30,		December 31,
	2014		2013
Accrued clinical trials	$	1,056	$	417
Accrued compensation	333		1,093
Accrued consulting	362		315
Other accrued liabilities	149		77
	$	1,900	$	1,902

5. Stock Based Compensation

The Company’s stock option activity and related information for the six months ended June 30, 2014 was as follows (in thousands, except share and per share data):

							Weighted-avg.
	Shares				Weighted-avg.		Remaining	Aggregate
	Available		Stock Options		Exercise Price		Contractual	Intrinsic
	for Grant		Outstanding		Per Share		Life (in Years)	Value
Balance at December 31, 2013	762,867		1,909,769		$	8.77	8.58	$	11,818
Stock options granted	(529,000	)	529,000		$	8.27
Stock options cancelled	358,302		(358,302	)	$	14.58
Stock options exercised	—		(243,824	)	$	1.72
Balance at June 30, 2014	592,169		1,836,643		$	8.43	9.25	$	1,192
At June 30, 2014:
Vested and expected to vest			1,765,297		$	8.45	9.21	$	1,183
Exercisable			204,494		$	12.52	6.37	$	947

The aggregate intrinsic value of options exercised under all option plans was $3.1 million and $11,000 for the six months ended June 30, 2014 and 2013, respectively, determined as of the date of option exercise.

The Company recognized stock based compensation expense as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Research and development	$	366	$	2	$	831	$	4
General and administrative	511		14		1,421		28
Total	$	877	$	16	$	2,252	$	32

As of June 30, 2014, there were unrecognized compensation costs of $13.3 million related to stock options and the Company expects to recognize those costs over a weighted average period of 3.23 years.

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Stock-based compensation cost for stock options is estimated at the grant date based on the fair-value using the Black-Scholes option pricing model. The fair value of employee stock options is being amortized on a straight-line basis over the requisite service period of the awards. The fair value of employee stock options was estimated using the following weighted-average assumptions:

	Three Months Ended June 30,		Six Months Ended June 30,
	2014	2013	2014	2013
Risk-free interest rates	1.90% - 1.91%	—	1.90% - 1.92%	—
Expected life in years	6.08	—	6.08	—
Expected dividend yield	—	—	—	—
Expected volatility	100%	—	100%	—

6. Discontinued Operations

On September 11, 2013, the Company announced a restructuring plan related to the operations of Tranzyme Pharma. On December 13, 2013, the Company entered into a Technology Transfer and License Agreement with Genentech, Inc. ("Genentech"), and F. Hoffman-La Roche, Ltd. ("Roche") to sell certain Canadian fixed assets and materials, the MATCH technology and rights to the Genentech and Roche customer agreements and related intellectual property through licensing of patents for $4.0 million. The Company concluded that the operations of Tranzyme Pharma and related asset groups sold to Genentech and Roche would be accounted for as discontinued operations as the operations and cash flows of the discontinued component or asset group would be eliminated from ongoing operations of the Company and there would not be significant involvement in the component or asset group after the disposal transaction.

During the three months ended June 30, 2014, the Company recognized $20,000 income due to the true-up of certain Canadian tax liabilities related to the subsidiary operations of Tranzyme Pharma. During the six months ended June 30, 2014, the Company completed its obligations under the Technology Transfer and License Agreement with Genentech and Roche and recognized a gain on disposal of assets of $1.1 million within discontinued operations. Also, during the six months ended June 30, 2014, the Company recognized a $6,000 gain from previously unrecognized cumulative foreign currency translation adjustments related to the deconsolidation of subsidiary operations of Tranzyme Pharma.

The results of Tranzyme Pharma and related asset groups are disclosed as discontinued operations in the Consolidated Statements of Operations and Comprehensive Loss for the period presented (in thousands).

	Three Months Ended June 30, 2014		Six Months Ended June 30, 2014
Proceeds recognized pursuant to Technology Transfer and License Agreement	$	—	$	4,000
Less carrying value of assets sold:
Intangible assets	—		(2,053		)
Property and equipment	—		(356		)
Goodwill	—		(442		)
Net gain on disposal of assets	—		1,149
Other income (expenses) of discontinued operations	20		(6		)
Recognition of accumulated translation adjustments upon deconsolidation of subsidiary	—		(6		)
Net income from discontinued operations	$	20	$	1,137

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The assets and liabilities of Tranzyme Pharma and related asset groups are presented as held for disposal in the Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013. The carrying amount of assets and liabilities are as follows (in thousands):

	June 30, 2014		December 31, 2013
Prepaid expenses and other current assets	$	—	$	178
Property and equipment, net	—		356
Intangible assets, net	—		2,053
Goodwill	—		442
Assets of discontinued operations	$	—	$	3,029
Accounts payable	$	95	$	106
Deposit on sale of assets	—		3,000
Accrued liabilities	—		397
Liabilities of discontinued operations	$	95	$	3,503

Restructuring of Tranzyme Pharma

During the six months ended June 30, 2014, the Company paid most of the remaining liabilities related to the restructuring of Tranzyme Pharma. The remaining restructuring liabilities are classified as accounts payable in discontinued operations.

The following table summarizes the Company’s restructuring activities for the six months ended June 30, 2014 in thousands:

	Post- Employment Benefits			Moving and Shipping Costs			Operating Activities			Total
Accrued restructuring at December 31, 2013	$	392		$	99		$	11		$	502
Cash payments and other settlements	(392		)	(4		)	(11		)	(407		)
Accrued restructuring at June 30, 2014	$	—		$	95		$	—		$	95

7. Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares and common share equivalents outstanding for the period. Common stock equivalents are only included when their effect is dilutive. Potentially dilutive securities which include convertible preferred stock, warrants, convertible notes payable and outstanding stock options under the stock option plan have been excluded from the computation of diluted net loss per share as they would be anti-dilutive. For all periods presented, there is no difference in the number of shares used to compute basic and diluted shares outstanding due to the Company’s net loss position. All share and per share amounts for all periods presented in the following table have been adjusted retroactively to reflect the exchange for Tranzyme, shares as of the date of the Merger.

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The following table presents the computation of net loss per share (in thousands, except share and per share data):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Numerator
Net loss from continuing operations	$	(7,243	)	$	(2,087	)	$	(12,425	)	$	(2,818	)
Net income from discontinued operations	20			—			1,137			—
Net loss	$	(7,223	)	$	(2,087	)	$	(11,288	)	$	(2,818	)
Denominator
Weighted average common shares outstanding used to compute net loss per share, basic and diluted	15,539,053			643,674			15,480,469			640,465
Net loss per share of common stock, basic and diluted
Net loss per share from continuing operations	$	(0.46	)	$	(3.24	)	$	(0.80	)	$	(4.40	)
Net income per share from discontinued operations	—			—			0.07			—
Net loss per share	$	(0.46	)	$	(3.24	)	$	(0.73	)	$	(4.40	)

The following weighted average outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share of common stock for the periods presented because including them would have been anti-dilutive:

	Three Months Ended June 30,		Six Months ended June 30,
	2014	2013	2014	2013
Convertible preferred stock	—	4,840,324	—	4,840,324
Convertible preferred stock warrants	—	16,494	—	21,386
Common stock warrants	938,882	131,462	938,882	131,462
Common stock options	1,731,347	452,898	1,744,033	565,633
Total	2,670,229	5,441,178	2,682,915	5,558,805

In addition to the potentially dilutive securities noted above, the Company had outstanding convertible notes payable and accrued interest that were converted into 186,217 shares of common stock upon completion of the Merger. The Company has excluded these convertible notes payable from the table above.

8. Commitments and Contingencies

From time to time, the Company may be involved in disputes, including litigation, relating to claims arising out of operations in the normal course of its business. Any of these claims could subject the Company to costly legal expenses and, while the Company generally believes that it has adequate insurance to cover many different types of liabilities, its insurance carriers may deny coverage or its policy limits may be inadequate to fully satisfy any damage awards or settlements. If this were to happen, the payment of any such awards could have a material adverse effect on the Company's consolidated results of operations and financial position. Additionally, any such claims, whether or not successful, could damage the Company's reputation and business. The Company is currently not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on the Company's consolidated results of operations or financial position.

Leases

Rent expense was approximately $52,000 and $104,000 for the three and six months ended June 30, 2014 and $38,000 and $74,000 for the three and six months ended June 30, 2013, respectively.

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The following is a schedule of non-cancellable future minimum lease payments for operating leases as of June 30, 2014 (in thousands):

Years ending December 31:
2014 (Six Months)	$	113
2015	38
Total	$	151

9. Subsequent Events

On July 10, 2014 the Company priced an underwritten public offering of 4,200,000 shares of its common stock at an offering price of $6.00 per share. The offering raised gross proceeds to the Company of $25.2 million before deducting the underwriting discount of $1.5 million and other offering expenses. The net proceeds from the offering are expected to be used primarily to continue the Company's clinical development of OCR-002 and for working capital and other general corporate purposes.

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Item 2. Management’sDiscussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013. This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as those set forth under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2013, our actual results may differ materially from those anticipated in these forward-looking statements.

Overview

We are a clinical stage biopharmaceutical company focused on the development and commercialization of a clinical candidate, OCR-002 (ornithine phenylacetate), for the treatment of hepatic encephalopathy, or HE. HE is a serious complication of liver failure marked by mental changes including confusion, impaired motor skills, disorientation in time and space, and, in its more severe form, stupor, coma and even death. Common causes of liver malfunction leading to HE include alcoholism, viral hepatitis and auto-immune diseases, as well as obesity, Type II diabetes, and acetaminophen overdose. OCR-002 is an ammonia scavenger and has been granted orphan drug designation and Fast Track status by the U.S. Food and Drug Administration, or FDA, for the treatment of hyperammonemia and resultant hepatic encephalopathy, or HE, in patients with acute liver failure and acute on chronic liver disease.

Our strategy is to focus clinical development activities on the intravenous form of OCR-002 to treat acute HE in hospitalized patients while continuing formulation work on the oral form of OCR-002 which would focus on acute-to-chronic care of HE patients.

OCR-002 Development

We are now conducting a randomized, placebo-controlled double blind Phase 2b clinical trial to evaluate the efficacy of intravenous administration of OCR-002 in reducing the severity of HE symptoms among hospitalized HE patients. We expect to complete trial enrollment in mid-2015. In addition, there are two investigator-sponsored Phase 2a clinical trials underway, one in Spain studying ammonia levels in a double blind trial of patients with upper gastrointestinal bleeding and the other an open label NIH-sponsored trial of the safety of OCR-002 in patients with hyperammonemia and HE due to acute liver failure or injury.

"Stop HE" Phase 2b Trial

  We are currently conducting a randomized, placebo-controlled double blind Phase 2b clinical trial in 140 patients to evaluate the efficacy of intravenously administered OCR-002 in reducing the severity of HE symptoms among hospitalized HE patients. We commenced this trial in the fourth quarter of 2013 and enrolled our first patient in January 2014. We plan to conduct the trial at approximately 100 sites in the United States and Europe. To increase the pace of enrollment, we amended our trial protocol in March 2014 to broaden the eligible patient selection criteria. In April 2014, we further amended the protocol to increase patient dosage to 20 grams per day based on our review of preliminary pharmacokinetic data from the two ongoing Phase 2a trials discussed below. This increased dosage level remains below the maximum tolerated dose of 40 grams per day observed in our Phase 1 trial. The primary efficacy endpoint of this trial is time to clinically meaningful improvement in HE symptoms. Secondary endpoints include severity of HE, ammonia reduction, length of hospital stay and time in the intensive care unit, among others. We expect to complete trial enrollment in mid-2015 and expect to announce the results from this study in the second half of 2015.

Investigator Sponsored Phase 2a Trials

In addition, there are two investigator-sponsored Phase 2a trials of OCR-002 underway. One of these trials is being conducted in Spain, to assess ammonia lowering in patients with upper gastrointestinal bleeding. The first phase of this trial was conducted on an open label basis and has been completed. The investigators observed a rapid decline in ammonia in the 10 patients who received OCR-002 at 10 grams per day in addition to the standard of care. The second phase of the trial is a double-blind placebo controlled study of 38 patients. The second trial, sponsored by National Institutes of Health, or NIH, is a pilot open label dose ranging study of up to 10 grams per day, assessing safety and pharmacokinetics of OCR-002 in patients with acute liver failure/injury and hyperammonemia. In the NIH trial, 13 of 14 evaluable patients have recovered and one patient died.

Phase 1 Pharmacokinetic Trial

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 We completed Phase 1 pharmacokinetic and safety trials of OCR-002 in a parallel ascending dose clinical trial of 48 healthy volunteers and 43 stable cirrhotic patients. No serious adverse events, deaths or discontinuations were reported. The most common dose-related toxicities included dizziness, headache, nausea and blurred vision. Through this trial, we established the pharmacokinetic profile of OCR-002 and identified safety margins.    

Pre-clinical Studies

            Preclinical studies of OCR-002 were performed in two animal models, rat with bile duct ligation as a model for chronic liver disease and pig with hepatic artery ligation as a model for acute liver failure. In the rat model, OCR-002 significantly reduced arterial ammonia, and in the pig model, OCR-002 significantly reduced arterial ammonia, brain ammonia and intracranial pressure.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments related to each of our critical accounting areas. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We discussed accounting policies and assumptions that involve a higher degree of judgment and complexity within our Annual Report on Form 10-K for the year ended December 31, 2013. Other than those discussed below, there have been no material changes to our critical accounting policies and estimates as disclosed in our Annual Report on Form 10-K.

Merger with Tranzyme, Inc.

On July 15, 2013, Terrapin Acquisition, Inc., a Delaware corporation (“Merger Sub”) and wholly owned subsidiary of Tranzyme, Inc., a Delaware corporation (“Tranzyme”), completed its merger (the “Merger”) with and into Ocera Therapeutics, Inc., a private Delaware corporation (“Private Ocera”).  Private Ocera is considered the acquiring company in the Merger for accounting purposes.  In connection with the Merger, the combined company changed its name to Ocera Therapeutics, Inc. and the name of Private Ocera was changed to Ocera Subsidiary, Inc. 

Discontinued Operations

The results of operations of the components to be disposed of, related restructuring costs and gain on disposal of assets have been classified as net income (loss) from discontinued operations from their acquisition on July 15, 2013 through June 30, 2014. The assets and liabilities of Tranzyme Pharma have been classified as assets and liabilities, respectively, of discontinued operations.

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Results of Operations

Three and Six Months Ended June 30, 2014 and 2013 (in thousands):

	Three Months Ended June 30,						Change			Six Months Ended June 30,						Change
	2014			2013						2014			2013
Revenue:
Royalty revenue	$	33		$	—		$	33		$	78		$	—		$	78
Total Revenue	33			—			33			78			—			78
Operating expenses:
Research and development	4,826			365			4,461			7,292			434			6,858
General and administrative	2,421			1,652			769			5,154			2,223			2,931
Amortization of intangibles	41			—			41			82			—			82
Total operating expenses	7,288			2,017			5,271			12,528			2,657			9,871
Total other income (expense), net	12			(70		)	82			25			(161		)	186
Net loss from continuing operations	(7,243		)	(2,087		)	(5,156		)	(12,425		)	(2,818		)	(9,607		)
Net income from discontinued operations	20			—			20			1,137			—			1,137
Net loss	(7,223		)	(2,087		)	(5,136		)	(11,288		)	(2,818		)	(8,470		)
Unrealized gain on investments	(1		)	—			(1		)	1			—			1
Comprehensive loss	$	(7,224	)	$	(2,087	)	$	(5,137	)	$	(11,287	)	$	(2,818	)	$	(8,469	)

Revenues

Revenue for the three and six months ended June 30, 2014 was $33,000 and $78,000, respectively, consisting of royalty revenue from a licensing agreement. No revenue was reported in the three and six months ended June 30, 2013 as the license agreement was acquired in connection with our Merger in July 2013.

Costs and Expenses

Research and Development Expenses

Our research and development expenses increased by $4.5 million for the three months ended June 30, 2014 compared to the three months ended June 30, 2013. This increase was due primarily to costs associated with our clinical development of OCR-002, an increase in headcount related to the Merger and an increase in stock compensation expense.

Our research and development expenses increased by $6.9 million for the six months ended June 30, 2014 compared to the six months ended June 30, 2013. This increase was also due primarily to costs associated with our clinical development of OCR-002, an increase in headcount related to the Merger and an increase in stock compensation expense.

Our expenses related to clinical trials are based on estimates of patient enrollment and related expenses at clinical investigator sites as well as estimates for the services received and efforts expended pursuant to contracts with multiple research institutions and contract research organizations that may be used to conduct and manage clinical trials on our behalf. We generally accrue expenses related to clinical trials based on contracted amounts applied to the level of patient enrollment and activity. If timelines or contracts are modified based upon changes in the clinical trial protocol or scope of work to be performed, we modify our estimates of accrued expenses accordingly on a prospective basis.

Due to the significant risks and uncertainties inherent in the clinical development and regulatory approval processes, we cannot reasonably estimate the cost to complete projects and development timelines for their completion. Enrollment in clinical trials might be delayed or occur faster than anticipated for reasons beyond our control, requiring additional cost and time or accelerating spending. Results from clinical trials might not be favorable, or might require us to perform additional unplanned clinical trials, accelerating spending, requiring additional cost and time, or resulting in termination of the project. Regulatory reviews can also be delayed. Process development and manufacturing scale-up for

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production of clinical and commercial product supplies might take longer and cost more than our forecasts. As a result, clinical development and regulatory programs are subject to risks and changes that might significantly impact cost projections and timelines. We will need to raise additional money to advance development and commercialization of OCR-002 which may include entering into strategic alliances.

General and Administrative Expenses

Our general and administrative expenses increased by $0.8 million for the three months ended June 30, 2014 compared to the three months ended June 30, 2013. The increase was due primarily to an increase in legal and accounting fees and other expenses associated with our corporate governance including directors and officer insurance and fees, an increase in headcount and stock compensation expense. Partially offsetting these increases was a decrease in costs related to preparatory activities associated with the Merger, which was consummated in July 2013.

Our general and administrative expenses increased by $2.9 million for the six months ended June 30, 2014 compared to the six months ended June 30, 2013. The increase was due primarily to an increase in legal and accounting fees and other expenses associated with our corporate governance including directors and officer insurance and fees, an increase in stock compensation expense, headcount and rent. Partially offsetting these increases was a decrease in costs related to preparatory activities associated with the Merger, which was consummated in July 2013.

We expect that our general and administrative expenses may increase in the future as we expand our operating activities, maintain and expand our patent portfolio, and incur additional costs associated with public company support including legal and accounting fees and director and officers' liability insurance.

Amortization of intangibles

For the three and six months ended June 30, 2014, we recognized $41,000 and $82,000, respectively, for amortization of intangibles. No amortization was recorded in the three and six months ended June 30, 2013 as the intangible assets were acquired in the Merger in July 2013.

Other Income (Expense), Net

For the three and six months ended June 30, 2014, we recognized $12,000 and $25,000, respectively, of other income (expense), net, which was attributable to interest income earned on our investment portfolio. For the three and six months ended June 30, 2013, we recognized $(70,000) and $(161,000), respectively, of other income (expense), net, which primarily consisted of interest accrued and amortization of debt issuance costs on convertible notes payable and change in fair value of warrant liability. No interest and other expense was recorded in the three and six months ended June 30, 2014 due to the conversion of convertible notes payable to common stock as a result of the Merger in July 2013.

Net income from discontinued operations

During the six months ended June 30, 2014, we completed our obligations under the Technology Transfer and License Agreement with Genentech, Inc. and F. Hoffman-La Roche, Ltd., and recognized a gain on disposal of assets of $1.1 million within discontinued operations. During the three months ended June 30, 2014, we recognized $20,000 income due to the true-up of certain Canadian tax liabilities related to the subsidiary operations of Tranzyme Pharma.

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The following table summarizes the results of discontinued operations for the quarter ended June 30, 2014 (in thousands):

	Three Months Ended		Six Months Ended
	June 30, 2014		June 30, 2014
Proceeds recognized pursuant to Technology Transfer and License Agreement	$	—	$	4,000
Less carrying value of assets sold:
Intangible assets	—		(2,053		)
Property and equipment	—		(356		)
Goodwill	—		(442		)
Net gain on disposal of assets	—		1,149
Other income (expenses) of discontinued operations	20		(6		)
Recognition of accumulated translation adjustments upon deconsolidation of subsidiary	—		(6		)
Net income from discontinued operations	$	20	$	1,137

Liquidity and Capital Resources

Cash Flows

The following table summarizes our cash flows for the six months ended June 30, 2014 and 2013 (in thousands):

	Six Months Ended June 30,
	2014			2013
Cash flow from:
Continuing operating activities	$	(10,017	)	$	(1,591	)
Discontinued operating activities	(407		)	—
Continuing investing activities	5,835			(2		)
Discontinued investing activities	1,165			—
Continuing financing activities	398			20
Net decrease in cash and cash equivalents	$	(3,026	)	$	(1,573	)

Comparison of the Six Months Ended June 30, 2014 and 2013

The primary use of cash in continuing operating activities for the six months ended June 30, 2014 was the result of our net loss from continuing operations of $12.4 million plus changes in working capital of $0.2 million. These changes were partially offset by non-cash charges of $2.6 million including depreciation expense, share-based compensation expense and the amortization of intangible assets acquired in the Merger. Cash used in continuing operating activities for the six months ended June 30, 2013 was related primarily to our net loss of $2.8 million, partially offset by non-cash charges of $0.2 million including depreciation expense, share-based compensation expense and non-cash debt and investment related expenses and changes in working capital of $1.0 million.

Cash used in discontinued operating activities for the six months ended June 30, 2014 was due primarily to payment of accrued liabilities of discontinued operations.

Cash provided by continuing investing activities for the six months ended June 30, 2014 related to $15.0 million of investment maturities, partially offset by purchases of short-term and long-term investments of $9.2 million. For the six months ended June 30, 2013, net cash used by continuing investing activities related to purchases of property and equipment.

Cash provided by discontinued operations represents cash proceeds related to the Technology Transfer and License Agreement with the Genentech and Roche Group for rights to the MATCHdiscovery platform and collection of other receivables.

Net cash provided by continuing financing activities for the six months ended June 30, 2014 and June 30, 2013 related to proceeds from the exercise of stock options.

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Capital Resources and Funding Requirements

We will require additional funds to support future operations including our development activities associated with the IV and oral forms of OCR-002. Our future funding requirements depends on many factors, including, but not limited to the progress, timing, scope and costs of our nonclinical studies and clinical trials, including the ability to enroll patients on a timely basis in our ongoing and potential future clinical trials, the time and cost necessary to respond to technological, market or governmental developments, and the cost of filing, prosecuting, defending and enforcing any patent claims or other intellectual property rights.

We expect to fund expenses from our current cash and cash equivalents, possible strategic opportunities and potential additional financing transactions. We believe that our current cash and cash equivalents, including proceeds from our July 2014 public offering of common stock, will be sufficient to fund our operations for at least the next twelve months.

We have based our estimates of our cash needs on a number of assumptions that may prove to be wrong, and changing circumstances beyond our control may cause us to consume capital more rapidly than we currently anticipate. For example, our OCR-002 Phase 2b clinical trial may cost more than we expect, or development of the oral formulation of OCR-002 may involve the license of proprietary technology. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidate, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical trials. If adequate funds are not available to us on a timely basis, or at all, we may be required to terminate or delay clinical trials or other development activities for OCR-002.

Our ability to finance operations beyond our current resources will depend heavily on our ability to obtain favorable results in clinical trials of OCR-002 and to develop and commercialize OCR-002 successfully. Additional financing may not be available when we need it or may not be available on terms that are favorable to us. We may elect to raise additional funds even before we need them if the conditions for raising capital are favorable. We may seek to raise additional capital through a combination of private and public equity offerings and debt financings. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of existing stockholders will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of existing stockholders. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring debt, making capital expenditures or declaring dividends.

On July 10, 2014 we priced an underwritten public offering of 4,200,000 shares of our common stock at an offering price of $6.00 per share. The offering raised gross proceeds of $25.2 million before deducting the underwriting discount of $1.5 million and other offering expenses. The net proceeds from the offering are expected to be used primarily to continue our clinical development of OCR-002 and for working capital and other general corporate purposes.

Contractual Obligations

The following is a summary of our non-cancellable future minimum lease payments for operating leases at June 30, 2014 (in thousands):

Years ending December 31:
2014 (Six Months)	$	113
2015	38
Total	$	151

In the normal course of business, we enter into various firm purchase commitments related to active pharmaceutical ingredients, clinical studies and research studies. As of June 30, 2014, the Company has approximately $2.0 million in non-cancellable contractual obligations and commitments.

Off-Balance Sheet Arrangements

We do not currently have, and did not have during the periods presented, any off-balance sheet arrangements, as defined under SEC rules. 

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Item 3.Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Risk

We have has historically contracted with third-party providers to manufacture drug substance and to conduct clinical trials and perform other research and development activities in Europe. Accordingly, we are exposed to fluctuations in foreign currency exchange rates in connection with the liabilities incurred by us in these relationships. We do not currently hedge our exposures to foreign currency fluctuations.

    Market Risk

Our cash and cash equivalents and short-term investments as of June 30, 2014, consisted of cash, money market funds, commercial paper and corporate debt securities. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of United States interest rates. However, because of the short-term nature of the instruments in our portfolio, a sudden change in market interest rates would not be expected to have a material impact on our financial condition and/or results of operations.

Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our 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.

Our management, with the participation of our principal executive officer and principal financial and accounting officer, evaluated the effectiveness of our disclosure controls and procedures as of the period covered by this report. Based on that evaluation, our principal executive officer and principal financial and accounting officer concluded that, as of June 30, 2014, our disclosure controls and procedures were effective at the reasonable assurance level.

We continue to review and document our disclosure controls and procedures, including our internal controls and procedures for financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.Legal Proceedings

We are not currently subject to any material legal proceedings.

Item 1A.Risk Factors

We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission, which could materially affect our business, financial condition or future results. During the quarterly period covered by this Quarterly Report on Form 10-Q, there were no material changes to the risk factors described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6.    Exhibits

(a) Exhibits required by Item 601 of Regulation S-K.

Exhibit Number	Description
10.1	Agreement of Employment dated April 30, 2014 by and between the Company and Gaurav Aggarwal (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 2, 2014).
10.2*	Consulting Agreement dated as of June 2, 2014 by and between the Company and Danforth Advisors.
31.1*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Principal Financial Officer 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  Calculation Linkbase Document
101.LAB+	XBRL Taxonomy Label Linkbase Document
101.PRE+	XBRL Taxonomy Presentation Linkbase Document
101.DEF+	XBRL Taxonomy Definitions Linkbase Document

*Filed herewith

**Furnished herewith 

+ Attached as Exhibits 101 to this report are the following financial statements from our Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Statements of Cash Flows and (iv) related notes to these financial statements tagged as blocks of text. 

The XBRL related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended (“Securities Act”) and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liabilities of those sections.

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SIGNATURES

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.

OCERA THERAPEUTICS, INC.

(Registrant)

Date:	August 13, 2014	By:	/s/ Linda S. Grais, M.D.
			Linda S. Grais, M.D.
			President and Chief Executive Officer
Date:	August 13, 2014	By:	/s/ Sharon Tetlow
			Sharon Tetlow
			Acting Chief Financial Officer and Treasurer

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EX-10.2

Exhibit 10.2

CONSULTING AGREEMENT

This Consulting Agreement (the “Agreement”) is made effective as of June 2, 2014 (the “Effective Date”), by and between Ocera, a Delaware corporation, with its principal place of business being 525 University Avenue, Suite 610, Palo Alto, CA 94301 (the “Company”) and Danforth Advisors, LLC, a Massachusetts limited liability corporation, with its principal place of business being 91 Middle Road, Southborough, MA 01772 (“Danforth”). The Company and Danforth are herein sometimes referred to individually as a “Party” and collectively as the “Parties.”

WHEREAS, the Company possesses know-how and proprietary technology related to the hepatic encephalopathyand

WHEREAS, Danforth has expertise in financial and corporate operations and strategy; and

WHEREAS, Danforth desires to serve as an independent consultant for the purpose of providing the Company with certain strategic and financial advice and support services, as more fully describedin Exhibit A attached hereto, (the "Services"); and

WHEREAS, the Company wishes to engage Danforth on the terms and conditions set forth herein.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which are hereby acknowledged, the Parties agree and covenant as follows.

1. Services of Consultant. Danforth will assist the Company with matters relating to the Services. The Services are more fully described in Exhibit A attached hereto. Danforth and the Company will review the Services on a monthly basis to prioritize and implement the tasks listed on Exhibit A.

2. Compensation for Services. In full consideration of Danforth’s full, prompt and faithful performance of the Services, the Company shall compensate Danforth a consulting fee more fully described in Exhibit A (the “Consulting Fee”). Danforth shall, from time to time, but not more frequently than twice per calendar month invoice the Company for Services rendered and such invoice will be paid upon fifteen (15) days of receipt. Each month the Parties shall evaluate jointly the current fee structure and scope of Services. Upon termination of this Agreement pursuant to Section 3, no compensation or benefits of any kind as described in this Section 2 shall be payable or issuable to Danforth after the effective date of such termination. In addition, the Company will reimburse Danforth for reasonable out-of-pocket business expenses, including but not limited to travel and parking, incurred by Danforth in performing the Services hereunder, upon submission by Danforth of supporting documentation reasonably acceptable to the Company. Any such accrued expenses in any given three (3) month period that exceed one thousand dollars ($1,000) shall be submitted to the Company for its prior written approval.

3. Term and Termination. The term of this Agreement will commence on the Effective Date and will continue through the anniversary of such date in the next calendar year (the “Term”). This Agreement may be extended for an additional period by mutual written agreement. This Agreement may be terminated by either Party hereto: (a) with Cause (as defined below), upon thirty (30) days prior written notice to the other Party; or (b) without cause upon ninety (90) days prior written notice to the other Party. For purposes of this Section 3, “Cause” shall include: (i) a breach of the terms of this Agreement which is not cured within thirty (30) days of written notice of such default or (ii) the commission of any act of fraud, embezzlement or deliberate disregard of a rule or policy of the Company.

4. Time Commitment. Danforth will devote such time to perform the Services under this Agreement as may reasonably be required.

1

5. Place of Performance. Danforth will perform the Services at such locations upon which the Company and Danforth may mutually agree. Danforth will not, without the prior written consent of the Company, perform any of the Services at any facility or in any manner that might give anyone other than the Company any rights to or allow for disclosure of any Confidential Information (as defined below).

6. Compliance with Policies and Guidelines. Danforth will perform the Services in accordance with all rules or policies adopted by the Company that the Company discloses in writing to Danforth.

7. Confidential Information. Danforth acknowledges and agrees that during the course of performing the Services, the Company may furnish, disclose or make available to Danforth information, including, but not limited to, material, compilations, data, formulae, models, patent disclosures, procedures, processes, business plans, projections, protocols, results of experimentation and testing, specifications, strategies and techniques, and all tangible and intangible embodiments thereof of any kind whatsoever (including, but not limited to, any apparatus, biological or chemical materials, animals, cells, compositions, documents, drawings, machinery, patent applications, records and reports), which is owned or controlled by the Company and is marked or designated as confidential at the time of disclosure or is of a type that is customarily considered to be confidential information (collectively the “Confidential Information"). Danforth acknowledges that the Confidential Information or any part thereof is the exclusive property of the Company and shall not be disclosed to any third party without first obtaining the written consent of the Company. Danforth further agrees to take all practical steps to ensure that the Confidential Information, and any part thereof, shall not be disclosed or issued to its affiliates, agents or employees, except on like terms of confidentiality. The above provisions of confidentiality shall apply for a period of five (5) years.

8. Intellectual Property. Danforth agrees that all ideas, inventions, discoveries, creations, manuscripts, properties, innovations, improvements, know‑how, inventions, designs, developments, apparatus, techniques, methods, and formulae that Danforth conceives, makes, develops or improves as a result of performing the Services, whether or not reduced to practice and whether or not patentable, alone or in conjunction with any other party and whether or not at the request or upon the suggestion of the Company (all of the foregoing being hereinafter collectively referred to as the “Inventions”), shall be the sole and exclusive property of the Company. Danforth hereby agrees in consideration of the Company’s agreement to engage Danforth and pay compensation for the Services rendered to the Company and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged that Danforth shall not, without the prior written consent of the Company, directly or indirectly, consult for, or become an employee of, any company which conducts business in the Field of Interest anywhere in the world. As used herein, the term “Field of Interest” shall mean the research, development, manufacture and/or sale of the products resulting from the Company’s technology. The limitations on competition contained in this Section 7 shall continue during the time that Danforth performs any Services for the Company (whether as a consultant, employee or otherwise), and for a period of three (3) monthsfollowing the termination of any such Services that Danforth performs for the Company. If any part of this section should be determined by a court of competent jurisdiction to be unreasonable in duration, geographic area, or scope, then this Section 7 is intended to and shall extend only for such period of time, in such area and with respect to such activity as is determined to be reasonable. Except as expressly provided herein, nothing in this Agreement shall preclude Danforth from consulting for or being employed by any other person or entity.

9. Non Solicitation. All personnel representing Danforth are contracted agents of Danforth. As such, they are obligated to provide the Services to the Company and are obligated to Danforth under confidentiality, non-compete, and non-solicitation agreements. Accordingly, they are not retainable as employees or contractors by the Company and the Company hereby agrees not to solicit, hire or retain their services for so long as they are contracted agents of Danforth and for two (2) years thereafter. Should the Company violate this restriction, it agrees to pay Danforth liquidated damages equal to fifteen thousand ($15,000) dollars for each Danforth contracted agent solicited and/or hired by the Company in violation of this Agreement, plus Danforth’s reasonable attorneys’ fees and costs incurred in enforcing this agreement should the Company fail or refuse to pay the liquidated damages amount in full within thirty (30) days following its violation.

2

10. Placement Services. In the event that Danforth refers a potential employee to the Company and that individual is hired, Danforth shall receive a fee equal to fifteen percent (15%) of the employee’s starting annual base salary and target annual bonus. This fee is due and owing whether an individual is hired, directly or indirectly on a permanent basis or on a contract or consulting basis by the Company, as a result of Danforth’s efforts within one (1) year of the date applicant(s) are submitted to the Company. Such payment is due within thirty (30) days of the employee’s start date.

11. No Implied Warranty. Except for any express warranties stated herein, the Services are provided on an "as is" basis, and the Company disclaims any and all other warranties, conditions, or representations (express, implied, oral or written), relating to the Services or any part thereof. Further, in performing the Services Danforth is not engaged to disclose illegal acts, including fraud or defalcations, which may have taken place. The foregoing notwithstanding, Danforth will promptly notify the Company if Danforth becomes aware of any such illegal acts during the performance of the Services. Because the Services do not constitute an examination in accordance with standards established by the American Institute of Certified Public Accountants (the “AICPA”), Danforth is precluded from expressing an opinion as to whether financial statements provided by the Company are in conformity with generally accepted accounting principles or any other standards or guidelines promulgated by the AICPA, or whether the underlying financial and other data provide a reasonable basis for the statements.

12. Indemnification. Each Party hereto agrees to indemnify and hold the other Party hereto, its directors, officers, agents and employees harmless against any claim based upon circumstances alleged to be inconsistent with such representations and/or warranties contained in this Agreement. Further, the Company shall indemnify and hold harmless Danforth and any of its subcontractors against any claims, losses, damages or liabilities (or actions in respect thereof) that arise out of or are based on the Services performed hereunder, except for any such claims, losses, damages or liabilities arising out of the gross negligence or willful misconduct Danforth or any of its subcontractors. The Company will endeavor to add Consultant and any applicable subcontractor to its insurance policies as additional insureds.

13. Independent Contractor. Danforth is not, nor shall Danforth be deemed to be at any time during the term of this Agreement, an employee of the Company, and therefore Danforth shall not be entitled to any benefits provided by the Company to its employees, if applicable. Danforth’s status and relationship with the Company shall be that of an independent contractor and consultant. Danforth shall not state or imply, directly or indirectly, that Danforth is empowered to bind the Company without the Company's prior written consent. Nothing herein shall create, expressly or by implication, a partnership, joint venture or other association between the parties. Danforth will be solely responsible for payment of al charges and taxes arising from his or her relationship to the Company as a consultant.

14. Records. Upon termination of Danforth’s relationship with the Company, Danforth shall deliver to the Company any property or Confidential Information of the Company relating to the Services which may be in its possession including products, project plans, materials, memoranda, notes, records, reports, laboratory notebooks, or other documents or photocopies and any such information stored using electronic medium.

15. Notices. Any notice under this Agreement shall be in writing (except in the case of verbal communications, emails and teleconferences updating either Party as to the status of work hereunder) and shall be deemed delivered upon personal delivery, one day after being sent via a reputable nationwide overnight courier service or two days after deposit in the mail or on the next business day following transmittal via facsimile. Notices under this Agreement shall be sent to the following representatives of the Parties:

If to the Company:

Name:        Linda Grais

Title:        Chief Executive Officer

3

Address:        525 University Avenue, Suite 610

Palo Alto, CA 94301

650-475-0158

E-mail:        lgrais@ocerainc.com

If to Danforth:

Name:        Gregg Beloff

Title:        Managing Director    

Address:        91 Middle Road

Southborough, MA 01772

Phone:        1 617 686-7679

E-mail:        gbeloff@danforthadvisors.com

16. Assignment and Successors. This Agreement may not be assigned by a Party without the consent of the other which shall not be unreasonably withheld, except that each Party may assign this Agreement and the rights, obligations and interests of such Party, in whole or in part, to any of its Affiliates, to any purchaser of all or substantially all of its assets or to any successor corporation resulting from any merger or consolidation of such Party with or into such corporation.

17. Force Majeure. Neither Party shall be liable for failure of or delay in performing obligations set forth in this Agreement, and neither shall be deemed in breach of its obligations, if such failure or delay is due to natural disasters or any causes beyond the reasonable control of either Party. In event of such force majeure, the Party affected thereby shall use reasonable efforts to cure or overcome the same and resume performance of its obligations hereunder.

18. Headings. The Section headings are intended for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

19. Integration; Severability. This Agreement is the sole agreement with respect to the subject matter hereof and shall supersede all other agreements and understandings between the Parties with respect to the same. If any provision of this Agreement is or becomes invalid or is ruled invalid by any court of competent jurisdiction or is deemed unenforceable, it is the intention of the Parties that the remainder of the Agreement shall not be affected.

20. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, excluding choice of law principles. The Parties agree that any action or proceeding arising out of or related in any way to this Agreement shall be brought solely in a Federal or State court of competent jurisdiction sitting in the Commonwealth of Massachusetts.

21. Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one agreement.

4

If you are in agreement with the foregoing, please sign where indicated below, whereupon this Agreement shall become effective as of the Effective Date.

DANFORTH ADVISORS, LLCCOMPANY

By:     /s/ Sharon Tetlow ___              By:    /s/ Linda S. Grais, M.D.

Print Name: Sharon Tetlow         Print Name: Linda Grais        

Title:     Managing Director        Title:     Chief Executive Officer    

Date:     June 2, 2014______     Date:     June 2, 2014__________    ____

5

EXHIBIT A

Description of Services and Schedule of Fees

Services:

• Active oversight of finance and accounting operational functions including cash management, SOX, reporting

• Audit committee and disclosure committee support including reporting, preparing meeting materials

• Periodic SEC filings and certification signoff, quarterly conference call management

• Investor, conference, road show and banker and analyst relationship outreach and management

• Manage treasury, risk management (insurance), employee equity incentive programs and reporting

• Other as needed

• All subject to mutual agreement and adjustment by Danforth and the Company

Fees:     Sharon Tetlow $325/hour; estimated 2 days per week

6

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Linda S. Grais, M.D., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Ocera Therapeutics, Inc. (the registrant);

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 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 internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant 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) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) 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

(d) 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 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:	August 13, 2014	By:	/s/ Linda S. Grais, M.D.
			Linda S. Grais, M.D.
			President and Chief Executive Officer
			(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Sharon Tetlow, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Ocera Therapeutics, Inc. (the registrant);

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 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 internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant 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) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) 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

(d) 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 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:	August 13, 2014	By:	/s/ Sharon Tetlow
			Sharon Tetlow
			Acting Chief Financial Officer and Treasurer
			(Principal Financial Officer)

EX-32.1

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 Ocera therapeutics, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Linda S. Grais, M.D., President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 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 results of operations of the Company.

Date:	August 13, 2014	By:	/s/ Linda S. Grais, M.D.
			Linda S. Grais, M.D.
			President and Chief Executive Officer
			(Principal Executive Officer)

EX-32.2

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 Ocera Therapeutics, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sharon Tetlow, Acting Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 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 results of operations of the Company.

Date:	August 13, 2014	By:	/s/ Sharon Tetlow
			Sharon Tetlow
			Acting Chief Financial Officer and Treasurer
			(Principal Financial Officer)

XML

Net Loss Per Share (Schedule of Antidilutive Securities Excluded From Earnings Per Share) (Details)	0 Months Ended	3 Months Ended		6 Months Ended
	Jul. 15, 2013	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount		2,670,229	5,441,178	2,682,915	5,558,805
Conversion of notes payable and interest accrued excluded from diluted earnings per share	186,217
Convertible Preferred Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount		0	4,840,324	0	4,840,324
Convertible Preferred Stock [Member] | Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount		0	16,494	0	21,386
Common Stock [Member] | Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount		938,882	131,462	938,882	131,462
Common Stock [Member] | Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount		1,731,347	452,898	1,744,033	565,633

XML

Stock Based Compensation (Additional Information) (Details) (Stock Options [Member], USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate intrinsic value of options exercised	$ 3,100,000	$ 11,000
Compensation costs not yet recognized	$ 13,300,000		$ 13,300,000
Period for recognizing costs			3 years 2 months 24 days

XML

Fair Value Measurements (Details) (Recurring [Member], USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	$ 36,538	$ 41,904
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	9,427	5,774
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	27,111	36,130
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	0	0
Money Market Funds [Member] | Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	9,427	5,774
Money Market Funds [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	9,427	5,774
Money Market Funds [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	0	0
Money Market Funds [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	0	0
Commercial Paper [Member] | Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	7,499	15,246
Commercial Paper [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	0	0
Commercial Paper [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	7,499	15,246
Commercial Paper [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	0	0
Corporate Debt Securities [Member] | Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	19,612	20,884
Corporate Debt Securities [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	0	0
Corporate Debt Securities [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	19,612	20,884
Corporate Debt Securities [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	$ 0	$ 0

XML

Discontinued Operations (Restructuring Activities) (Details) (Tranzyme Pharma Inc. [Member], USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014
Restructuring Reserve [Roll Forward]
Accrued Restructuring at Start of Period	$ 502
Cash payments and other settlements	(407)
Accrued Restructuring at End of Period	95
Post-Employment Benefits [Member]
Restructuring Reserve [Roll Forward]
Accrued Restructuring at Start of Period	392
Cash payments and other settlements	(392)
Accrued Restructuring at End of Period	0
Moving and Shipping Costs [Member]
Restructuring Reserve [Roll Forward]
Accrued Restructuring at Start of Period	99
Cash payments and other settlements	(4)
Accrued Restructuring at End of Period	95
Operating Activities [Member]
Restructuring Reserve [Roll Forward]
Accrued Restructuring at Start of Period	11
Cash payments and other settlements	(11)
Accrued Restructuring at End of Period	$ 0

XML

Fair Value Measurements

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis as of June 30, 2014, and December 31, 2013, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value. As a basis for categorizing inputs, the Company uses a three-tier fair value hierarchy, which prioritizes the inputs used to measure fair value from market-based assumptions to entity specific assumptions:

Level 1: Quoted prices in active markets for identical assets or liabilities;

Level 2: Inputs, other than level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3: Unobservable inputs that are supported by little or no market activity, which require the Company to develop its own assumptions.

Assets measured at fair value on a recurring basis as of June 30, 2014 are as follows (in thousands):

	Balance as of June 30, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	$	9,427	$	9,427	$	—	$	—
Commercial paper	7,499		—		7,499		—
Corporate debt securities	19,612		—		19,612		—
Total assets	$	36,538	$	9,427	$	27,111	$	—

Assets measured at fair value on a recurring basis as of December 31, 2013 are as follows (in thousands):

	Balance as of December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	$	5,774	$	5,774	$	—	$	—
Commercial paper	15,246		—		15,246		—
Corporate debt securities	20,884		—		20,884		—
Total assets	$	41,904	$	5,774	$	36,130	$	—

XML

Balance Sheet Components (Accrued Liabilities) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Balance Sheet Components [Abstract]
Accrued clinical trials	$ 1,056	$ 417
Accrued compensation	333	1,093
Accrued consulting	362	315
Other accrued liabilities	149	77
Accrued liabilities	$ 1,900	$ 1,902

XML

Balance Sheet Components (Acquired Intangible Assets) (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Balance Sheet Components [Abstract]
Carrying value	$ 410,000		$ 410,000		$ 410,000
Accumulated amortization	(157,000)		(157,000)		(75,000)
Intangible assets, net	253,000		253,000		335,000
Weighted average remaining life (in years)			1 year 6 months		2 years
Amortization of intangibles	41,000	0	82,000	0
Estimated future amortization expense in 2014	100,000		100,000
Estimated future amortization expense in 2015	$ 200,000		$ 200,000

XML

Stock Based Compensation (Stock Option Activity) (Details) (Stock Options [Member], USD $) In Thousands, except Share data, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Stock Options [Member]
Shares Available for Grant
Shares available for grant	762,867
Stock options granted	(529,000)
Stock options cancelled	358,302
Shares available for grant	592,169	762,867
Stock Options Outstanding
Beginning balance, options	1,909,769
Stock options granted	529,000
Stock options cancelled	(358,302)
Stock options exercised	(243,824)
Ending balance, options	1,836,643	1,909,769
Stock options vested and expected to vest	1,765,297
Stock options exercisable	204,494
Weighted-average Exercise Price Per Share
Weighted-average exercise price, options outstanding, beginning balance	$ 8.77
Grants in period	$ 8.27
Cancelled in period	$ 14.58
Exercises in period	$ 1.72
Weighted-average exercise price, options outstanding, ending balance	$ 8.43	$ 8.77
Weighted-average exercise price, options exercisable	$ 8.45
Weighted-average exercise price, options vested and expected to vest	$ 12.52
Weighted-average remaining contractual life, options outstanding	9 years 3 months	8 years 6 months 29 days
Weighted-average remaining contractual life, options vested and expected to vest	9 years 2 months 16 days
Weighted-average remaining contractual life, options exercisable	6 years 4 months 13 days
Aggregate Intrinsic value, options outstanding	$ 1,192	$ 11,818
Aggregate Intrinsic value, options vested and expected to vest	1,183
Aggregate Intrinsic value, options exercisable	$ 947

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Stock Based Compensation (Stock-based compensation expense) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 877	$ 16	$ 2,252	$ 32
Research and Development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	366	2	831	4
General and Administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 511	$ 14	$ 1,421	$ 28

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation

The Company has a limited operating history and the sales and income potential of the Company's business and addressable market are unproven. The Company has experienced net losses each year since its inception and, as of June 30, 2014, had an accumulated deficit of $92.8 million. The Company anticipates that it will continue to incur net losses into the foreseeable future as it continues the development and commercialization of its lead drug candidate OCR-002 and expands its corporate infrastructure. Based on the Company's operating plan, the Company believes its current working capital is sufficient to fund its operations through at least the next twelve months.

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with United States of America generally accepted accounting principles ("U.S. GAAP") for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission. The financial statements and related notes do not include all information and footnotes required by U.S. GAAP for annual reports. This quarterly report should be read in conjunction with the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2013.

Unaudited Interim Financial Information

The accompanying interim consolidated financial statements and related disclosures are unaudited, have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the results of operations for the periods presented. The year-end balance sheet was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The consolidated results of operations for any interim period are not necessarily indicative of the results to be expected for the full year or for any other future year or interim period.

Use of Estimates

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

Discontinued Operations

On September 11, 2013, the Board of Directors approved a restructuring plan related to the operations of Tranzyme Pharma Inc. and its Sherbrooke, Quebec facility ("Tranzyme Pharma"), whereby the Company closed the operations of the facility effective as of November 11, 2013. On December 13, 2013, the Company entered into a Technology Transfer and License Agreement to sell the Company’s MATCH discovery platform and license the related intellectual property rights. The Company concluded that since Tranzyme Pharma's operations and the MATCH discovery platform comprised a component with distinct operations and cash flows that would be eliminated from ongoing operations, and the Company would not have significant involvement after the disposal, these components would be accounted for as discontinued operations. The results of operations of the components to be disposed of, related restructuring costs and gain on disposal of assets have been classified as net income from discontinued operations from their date of acquisition on July 15, 2013 through June 30, 2014. The assets and liabilities of Tranzyme Pharma have been classified as assets and liabilities, respectively, of discontinued operations. Unless noted otherwise, discussion in these notes to the financial statements pertain to our continuing operations.

Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update, or ASU, No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (topic 360); Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU 2014-08 provides additional requirements to classify a disposal of a component of an entity or a group of components of an entity in discontinued operations only if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014, with an option for early adoption. The Company intends to adopt this guidance at the beginning of our first quarter of fiscal year 2015, and does not expect the adoption of this standard will have a material impact on the Company’s financial statements.

In June 2014, the FASB issued Accounting Standards Update, or ASU, No. 2014-10, Development Stage Entities (Topic 915). ASU 2014-10 removes the distinction between development stage entities and other reporting entities in U.S. GAAP and eliminates the requirement to label financial statements as those of a development stage entity and eliminates the requirement to present inception to date information in the statements of income, cash flows and shareholder equity. The guidance is applied retroactively and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014, with an option for early adoption. The Company early adopted this guidance in the second quarter of 2014, and as a result, has removed the label “A Development Stage Company” from its financial statements and accompanying notes and eliminated the inception to date information from the Consolidated Statements of Operations and Comprehensive Loss and Consolidated Statements of Cash Flows. Other than presentation, the adoption of this standard did not have a material impact on the Company’s financial statements.

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Stock Based Compensation (Valuation Assumptions) (Details) (Stock Options [Member])	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Stock Options [Member]
Fair Value Assumptions and Methodology [Abstract]
Risk free interest rate		0.00%		0.00%
Risk free interest rate, minimum	1.90%		1.90%
Risk free interest rate, maximum	1.91%		1.92%
Expected life in years	6 years 29 days		6 years 29 days
Expected dividend yield	0.00%	0.00%	0.00%	0.00%
Expected volatility	100.00%	0.00%	100.00%	0.00%

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Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Commitments and Contingencies Disclosure [Abstract]
Rent expense	$ 52	$ 38	$ 104	$ 74
Future Minimum Payments Due by Fiscal Year Maturity [Abstract]
2014 (Six Months)	113		113
2015	38		38
Total	$ 151		$ 151

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 12,507	$ 15,533
Short-term investments, available-for-sale	25,611	30,167
Accounts receivable	33	93
Prepaid expenses and other current assets	635	470
Assets of discontinued operations	0	3,029
Current assets	38,786	49,292
Property and equipment, net	75	59
Long-term investments	0	1,513
Other non-current assets	87	26
Intangible assets, net	253	335
Goodwill	595	595
Total assets	39,796	51,820
Current liabilities:
Accounts payable	1,306	1,282
Accrued liabilities	1,900	1,902
Liabilities of discontinued operations	95	3,503
Total current liabilities	3,301	6,687
Other liabilities	0	1
Total liabilities	3,301	6,688
Commitments and contingencies (Note 8)
Stockholders' equity:
Preferred Stock - $0.00001 par value, 5,000,000 shares authorized and no shares issued or outstanding at June 30, 2014 and December 31, 2013.	0	0
Common stock - $0.00001 par value, 100,000,000 shares authorized, 15,541,758 and 15,300,214 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively.	0	0
Additional paid-in capital	129,265	126,615
Accumulated other comprehensive income	4	3
Accumulated deficit	(92,774)	(81,486)
Total stockholders' equity	36,495	45,132
Total liabilities and stockholders' equity	$ 39,796	$ 51,820

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Operating activities
Net loss	$ (11,288)	$ (2,818)
Adjustments to reconcile net loss to net cash used in operating activities:
Net income from discontinued operations	(1,137)	0
Depreciation	20	5
Amortization of intangibles	82	0
Stock based compensation	2,252	32
Change in valuation of warrant liability	0	(12)
Accretion of premium on investment securities	212	80
Debt discount, net and noncash interest expense	0	93
Changes in operating assets and liabilities:
Accounts receivable	60	0
Prepaid expenses and other assets	(139)	(1)
Accounts payable	11	778
Accrued liabilities	(90)	252
Net cash used in continuing operating activities	(10,017)	(1,591)
Net cash used in discontinued operating activities	(407)	0
Net cash used in operating activities	(10,424)	(1,591)
Investing activities
Purchases of property and equipment	(23)	(2)
Purchase of investments	(9,187)	0
Sale and maturities of investments	15,045	0
Net cash provided by (used in) continuing investing activities	5,835	(2)
Net cash provided by discontinued investing activities	1,165	0
Net cash provided by (used in) investing activities	7,000	(2)
Financing activities
Proceeds from issuance of common stock	398	20
Net cash provided by continuing financing activities	398	20
Net increase (decrease) in cash and cash equivalents	(3,026)	(1,573)
Cash and cash equivalents—beginning of period	15,533	2,303
Cash and cash equivalents—end of period	12,507	730
Supplemental schedule of noncash investing and financing activities
Cashless exercise of stock options	22	0
Acquisition of fixed assets with accounts payable	13	0
Deferred offering costs in accrued expenses and accounts payable	$ 87	$ 0

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Discontinued Operations (Discontinued Operations in the Company's Consolidated Statements of Operations and Comprehensive Loss) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net income from discontinued operations (including gain on disposal of $1,149 for the six months ended June 30, 2014)	$ 20	$ 0	$ 1,137	$ 0
Tranzyme Pharma Inc. [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net gain on disposal of assets	0		1,149
Other income (expenses) of discontinued operations	20		(6)
Recognition of accumulated translation adjustments upon deconsolidation of subsidiary	0		(6)
Net income from discontinued operations (including gain on disposal of $1,149 for the six months ended June 30, 2014)	20		1,137
Tranzyme Pharma Inc. [Member] | Intangible Assets [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Lees carrying value of assets sold	0		(2,053)
Tranzyme Pharma Inc. [Member] | Property, Plant and Equipment [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Lees carrying value of assets sold	0		(356)
Tranzyme Pharma Inc. [Member] | Goodwill [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Lees carrying value of assets sold	0		(442)
Tranzyme Pharma Inc. [Member] | Customer Agreements And Intellectual Property [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Proceeds recognized pursuant to Technology Transfer and License Agreement	$ 0		$ (4,000)

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Schedule of non-cancellable future minimum lease payments for operating leases

The following is a schedule of non-cancellable future minimum lease payments for operating leases as of June 30, 2014 (in thousands):

Years ending December 31:
2014 (Six Months)	$	113
2015	38
Total	$	151

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Discontinued Operations (Discontinued Operations in the Company's Consolidated Statement of Financial Position) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets of discontinued operations	$ 0	$ 3,029
Tranzyme Pharma Inc. [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Prepaid expenses and other current assets	0	178
Property and equipment	0	356
Intangible assets, net	0	2,053
Goodwill	0	442
Assets of discontinued operations	0	3,029
Accounts payable	95	106
Deposit on sale of assets	0	3,000
Accrued liabilities	0	397
Liabilities of discontinued operations	$ 95	$ 3,503

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Summary of Significant Accounting Policies (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Accounting Policies [Abstract]
Accumulated deficit	$ (92,774)	$ (81,486)

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The Company

6 Months Ended

Jun. 30, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

The Company

The Company

Ocera Therapeutics, Inc. (the "Company") is a clinical stage biopharmaceutical company focused on the development and commercialization of OCR-002 (ornithine phenylacetate). OCR-002 is an ammonia scavenger and has been granted orphan drug designation and Fast Track status from the U.S. Food and Drug Administration (FDA) for the treatment of hyperammonemia and resultant hepatic encephalopathy in patients with acute liver failure and acute or chronic liver disease.

On July 15, 2013, Terrapin Acquisition, Inc., a Delaware corporation (“Merger Sub”) and wholly owned subsidiary of Tranzyme, Inc., a Delaware corporation (“Tranzyme”), completed its merger (the “Merger”) with and into Ocera Therapeutics, Inc., a private Delaware corporation (“Private Ocera”).  Private Ocera is considered the acquiring company in the Merger for accounting purposes.  In connection with the Merger, the combined company changed its name to Ocera Therapeutics, Inc. and the name of Private Ocera was changed to Ocera Subsidiary, Inc. 

As of June 30, 2014, the Company has incurred losses since inception of $92.8 million. The Company expects to continue to incur losses and that it will require additional financial resources to advance OCR-002 to either commercial stage or liquidity events.

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Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.00001	$ 0.00001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.00001	$ 0.00001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	15,541,758	15,300,214
Common stock, shares outstanding	15,541,758	15,300,214

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Assets and liabilities measured at fair value on a recurring basis

Assets measured at fair value on a recurring basis as of June 30, 2014 are as follows (in thousands):

	Balance as of June 30, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	$	9,427	$	9,427	$	—	$	—
Commercial paper	7,499		—		7,499		—
Corporate debt securities	19,612		—		19,612		—
Total assets	$	36,538	$	9,427	$	27,111	$	—

Assets measured at fair value on a recurring basis as of December 31, 2013 are as follows (in thousands):

	Balance as of December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	$	5,774	$	5,774	$	—	$	—
Commercial paper	15,246		—		15,246		—
Corporate debt securities	20,884		—		20,884		—
Total assets	$	41,904	$	5,774	$	36,130	$	—

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Jul. 31, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	Ocera Therapeutics, Inc.
Entity Central Index Key	0001274644
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Document Type	10-Q
Document Period End Date	Jun. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		19,741,758

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Balance Sheet Components (Tables)

6 Months Ended

Jun. 30, 2014

Balance Sheet Components [Abstract]

Summary of available for sale investments

The following table summarizes the Company's available for sale investments as of June 30, 2014 (in thousands).

	Maturity (in Years)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Short-term investments:
Commercial paper	1 or less	$	5,996	$	3	$	—	$	5,999
Corporate debt securities	1 or less	19,611		1		—		19,612
Total investments		$	25,607	$	4	$	—	$	25,611

The following table summarizes the Company's available for sale investments as of December 31, 2013 (in thousands).

	Maturity (in Years)	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Short-term investments:
Commercial paper	1 or less	$	15,232	$	14	$	—		$	15,246
Corporate debt securities	1 or less	14,930		—		(9		)	14,921
Total		30,162		14		(9		)	30,167
Long-term investments:
Corporate debt securities	More than 1	1,515		—		(2		)	1,513
Total		1,515		—		(2		)	1,513
Total investments		$	31,677	$	14	$	(11	)	$	31,680

Property and equipment components

Property and equipment, net were as follows (in thousands):

	Useful Life	June 30,			December 31,
	(in years)	2014			2013
Computer equipment and software	3 years	$	43		$	40
Office furniture and equipment	5 years	51			43
Construction in progress	5 years	25			—
		119			83
Accumulated depreciation		(44		)	(24		)
Property and equipment, net		$	75		$	59

Net book value of acquired intangible assets

The net book value of acquired intangible assets were as follows (in thousands):

	June 30,			December 31,
Customer Agreements:	2014			2013
Carrying value	$	410		$	410
Accumulated amortization	(157		)	(75		)
Intangible assets, net	$	253		$	335
Weighted average remaining life (in years)	1.5			2.0

Schedule of accrued liabilities

Accrued liabilities were as follows (in thousands):

	June 30,		December 31,
	2014		2013
Accrued clinical trials	$	1,056	$	417
Accrued compensation	333		1,093
Accrued consulting	362		315
Other accrued liabilities	149		77
	$	1,900	$	1,902

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Consolidated Statements of Operations and Comprehensive Loss (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenue:
Royalty revenue	$ 33	$ 0	$ 78	$ 0
Total revenue	33	0	78	0
Operating expenses:
Research and development	4,826	365	7,292	434
General and administrative	2,421	1,652	5,154	2,223
Amortization of intangibles	41	0	82	0
Impairment of intangibles	0	0	0	0
Total operating expenses	7,288	2,017	12,528	2,657
Other income (expense):
Interest and other income	12	0	25	0
Interest and other expense	0	(77)	0	(173)
Change in fair value of warrant liability	0	7	0	12
Total other income (expense), net	12	(70)	25	(161)
Net loss from continuing operations	(7,243)	(2,087)	(12,425)	(2,818)
Net income from discontinued operations (including gain on disposal of $1,149 for the six months ended June 30, 2014)	20	0	1,137	0
Net loss	(7,223)	(2,087)	(11,288)	(2,818)
Net loss per share:
Net loss per share from continuing operations, basic and diluted	$ (0.46)	$ (3.24)	$ (0.80)	$ (4.40)
Net income per share from discontinued operations, basic and diluted	$ 0.00	$ 0.00	$ 0.07	$ 0.00
Net loss per share, basic and diluted	$ (0.46)	$ (3.24)	$ (0.73)	$ (4.40)
Weighted average number of shares used to compute net loss per share of common stock, basic and diluted	15,539,053	643,674	15,480,469	640,465
Other comprehensive loss:
Net loss	(7,223)	(2,087)	(11,288)	(2,818)
Unrealized gain (loss) on investments	(1)	0	1	0
Comprehensive loss	$ (7,224)	$ (2,087)	$ (11,287)	$ (2,818)

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Discontinued Operations

6 Months Ended

Jun. 30, 2014

Restructuring and Related Activities [Abstract]

Discontinued Operations

Discontinued Operations

On September 11, 2013, the Company announced a restructuring plan related to the operations of Tranzyme Pharma. On December 13, 2013, the Company entered into a Technology Transfer and License Agreement with Genentech, Inc. ("Genentech"), and F. Hoffman-La Roche, Ltd. ("Roche") to sell certain Canadian fixed assets and materials, the MATCH technology and rights to the Genentech and Roche customer agreements and related intellectual property through licensing of patents for $4.0 million. The Company concluded that the operations of Tranzyme Pharma and related asset groups sold to Genentech and Roche would be accounted for as discontinued operations as the operations and cash flows of the discontinued component or asset group would be eliminated from ongoing operations of the Company and there would not be significant involvement in the component or asset group after the disposal transaction.

During the three months ended June 30, 2014, the Company recognized $20,000 income due to the true-up of certain Canadian tax liabilities related to the subsidiary operations of Tranzyme Pharma. During the six months ended June 30, 2014, the Company completed its obligations under the Technology Transfer and License Agreement with Genentech and Roche and recognized a gain on disposal of assets of $1.1 million within discontinued operations. Also, during the six months ended June 30, 2014, the Company recognized a $6,000 gain from previously unrecognized cumulative foreign currency translation adjustments related to the deconsolidation of subsidiary operations of Tranzyme Pharma.

The results of Tranzyme Pharma and related asset groups are disclosed as discontinued operations in the Consolidated Statements of Operations and Comprehensive Loss for the period presented (in thousands).

	Three Months Ended June 30, 2014		Six Months Ended June 30, 2014
Proceeds recognized pursuant to Technology Transfer and License Agreement	$	—	$	4,000
Less carrying value of assets sold:
Intangible assets	—		(2,053		)
Property and equipment	—		(356		)
Goodwill	—		(442		)
Net gain on disposal of assets	—		1,149
Other income (expenses) of discontinued operations	20		(6		)
Recognition of accumulated translation adjustments upon deconsolidation of subsidiary	—		(6		)
Net income from discontinued operations	$	20	$	1,137

The assets and liabilities of Tranzyme Pharma and related asset groups are presented as held for disposal in the Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013. The carrying amount of assets and liabilities are as follows (in thousands):

	June 30, 2014		December 31, 2013
Prepaid expenses and other current assets	$	—	$	178
Property and equipment, net	—		356
Intangible assets, net	—		2,053
Goodwill	—		442
Assets of discontinued operations	$	—	$	3,029
Accounts payable	$	95	$	106
Deposit on sale of assets	—		3,000
Accrued liabilities	—		397
Liabilities of discontinued operations	$	95	$	3,503

Restructuring of Tranzyme Pharma

During the six months ended June 30, 2014, the Company paid most of the remaining liabilities related to the restructuring of Tranzyme Pharma. The remaining restructuring liabilities are classified as accounts payable in discontinued operations.

The following table summarizes the Company’s restructuring activities for the six months ended June 30, 2014 in thousands:

	Post- Employment Benefits			Moving and Shipping Costs			Operating Activities			Total
Accrued restructuring at December 31, 2013	$	392		$	99		$	11		$	502
Cash payments and other settlements	(392		)	(4		)	(11		)	(407		)
Accrued restructuring at June 30, 2014	$	—		$	95		$	—		$	95

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Stock Based Compensation

6 Months Ended

Jun. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Options

Stock Based Compensation

The Company’s stock option activity and related information for the six months ended June 30, 2014 was as follows (in thousands, except share and per share data):

							Weighted-avg.
	Shares				Weighted-avg.		Remaining	Aggregate
	Available		Stock Options		Exercise Price		Contractual	Intrinsic
	for Grant		Outstanding		Per Share		Life (in Years)	Value
Balance at December 31, 2013	762,867		1,909,769		$	8.77	8.58	$	11,818
Stock options granted	(529,000	)	529,000		$	8.27
Stock options cancelled	358,302		(358,302	)	$	14.58
Stock options exercised	—		(243,824	)	$	1.72
Balance at June 30, 2014	592,169		1,836,643		$	8.43	9.25	$	1,192
At June 30, 2014:
Vested and expected to vest			1,765,297		$	8.45	9.21	$	1,183
Exercisable			204,494		$	12.52	6.37	$	947

The aggregate intrinsic value of options exercised under all option plans was $3.1 million and $11,000 for the six months ended June 30, 2014 and 2013, respectively, determined as of the date of option exercise.

The Company recognized stock based compensation expense as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Research and development	$	366	$	2	$	831	$	4
General and administrative	511		14		1,421		28
Total	$	877	$	16	$	2,252	$	32

As of June 30, 2014, there were unrecognized compensation costs of $13.3 million related to stock options and the Company expects to recognize those costs over a weighted average period of 3.23 years.

Stock-based compensation cost for stock options is estimated at the grant date based on the fair-value using the Black-Scholes option pricing model. The fair value of employee stock options is being amortized on a straight-line basis over the requisite service period of the awards. The fair value of employee stock options was estimated using the following weighted-average assumptions:

	Three Months Ended June 30,		Six Months Ended June 30,
	2014	2013	2014	2013
Risk-free interest rates	1.90% - 1.91%	—	1.90% - 1.92%	—
Expected life in years	6.08	—	6.08	—
Expected dividend yield	—	—	—	—
Expected volatility	100%	—	100%	—

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The Company (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Losses incurred since inception	$ (92,774)	$ (81,486)

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Stock Based Compensation (Tables)

6 Months Ended

Jun. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of stock option activity

The Company’s stock option activity and related information for the six months ended June 30, 2014 was as follows (in thousands, except share and per share data):

							Weighted-avg.
	Shares				Weighted-avg.		Remaining	Aggregate
	Available		Stock Options		Exercise Price		Contractual	Intrinsic
	for Grant		Outstanding		Per Share		Life (in Years)	Value
Balance at December 31, 2013	762,867		1,909,769		$	8.77	8.58	$	11,818
Stock options granted	(529,000	)	529,000		$	8.27
Stock options cancelled	358,302		(358,302	)	$	14.58
Stock options exercised	—		(243,824	)	$	1.72
Balance at June 30, 2014	592,169		1,836,643		$	8.43	9.25	$	1,192
At June 30, 2014:
Vested and expected to vest			1,765,297		$	8.45	9.21	$	1,183
Exercisable			204,494		$	12.52	6.37	$	947

Stock-based compensation expense

The Company recognized stock based compensation expense as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Research and development	$	366	$	2	$	831	$	4
General and administrative	511		14		1,421		28
Total	$	877	$	16	$	2,252	$	32

Stock option valuation assumptions

The fair value of employee stock options was estimated using the following weighted-average assumptions:

	Three Months Ended June 30,		Six Months Ended June 30,
	2014	2013	2014	2013
Risk-free interest rates	1.90% - 1.91%	—	1.90% - 1.92%	—
Expected life in years	6.08	—	6.08	—
Expected dividend yield	—	—	—	—
Expected volatility	100%	—	100%	—

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Subsequent Events

6 Months Ended

Jun. 30, 2014

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

On July 10, 2014 the Company priced an underwritten public offering of 4,200,000 shares of its common stock at an offering price of $6.00 per share. The offering raised gross proceeds to the Company of $25.2 million before deducting the underwriting discount of $1.5 million and other offering expenses. The net proceeds from the offering are expected to be used primarily to continue the Company's clinical development of OCR-002 and for working capital and other general corporate purposes.

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Net Loss Per Share

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Net Loss Per Share

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares and common share equivalents outstanding for the period. Common stock equivalents are only included when their effect is dilutive. Potentially dilutive securities which include convertible preferred stock, warrants, convertible notes payable and outstanding stock options under the stock option plan have been excluded from the computation of diluted net loss per share as they would be anti-dilutive. For all periods presented, there is no difference in the number of shares used to compute basic and diluted shares outstanding due to the Company’s net loss position. All share and per share amounts for all periods presented in the following table have been adjusted retroactively to reflect the exchange for Tranzyme, shares as of the date of the Merger.

The following table presents the computation of net loss per share (in thousands, except share and per share data):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Numerator
Net loss from continuing operations	$	(7,243	)	$	(2,087	)	$	(12,425	)	$	(2,818	)
Net income from discontinued operations	20			—			1,137			—
Net loss	$	(7,223	)	$	(2,087	)	$	(11,288	)	$	(2,818	)
Denominator
Weighted average common shares outstanding used to compute net loss per share, basic and diluted	15,539,053			643,674			15,480,469			640,465
Net loss per share of common stock, basic and diluted
Net loss per share from continuing operations	$	(0.46	)	$	(3.24	)	$	(0.80	)	$	(4.40	)
Net income per share from discontinued operations	—			—			0.07			—
Net loss per share	$	(0.46	)	$	(3.24	)	$	(0.73	)	$	(4.40	)

The following weighted average outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share of common stock for the periods presented because including them would have been anti-dilutive:

	Three Months Ended June 30,		Six Months ended June 30,
	2014	2013	2014	2013
Convertible preferred stock	—	4,840,324	—	4,840,324
Convertible preferred stock warrants	—	16,494	—	21,386
Common stock warrants	938,882	131,462	938,882	131,462
Common stock options	1,731,347	452,898	1,744,033	565,633
Total	2,670,229	5,441,178	2,682,915	5,558,805

In addition to the potentially dilutive securities noted above, the Company had outstanding convertible notes payable and accrued interest that were converted into 186,217 shares of common stock upon completion of the Merger. The Company has excluded these convertible notes payable from the table above.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

From time to time, the Company may be involved in disputes, including litigation, relating to claims arising out of operations in the normal course of its business. Any of these claims could subject the Company to costly legal expenses and, while the Company generally believes that it has adequate insurance to cover many different types of liabilities, its insurance carriers may deny coverage or its policy limits may be inadequate to fully satisfy any damage awards or settlements. If this were to happen, the payment of any such awards could have a material adverse effect on the Company's consolidated results of operations and financial position. Additionally, any such claims, whether or not successful, could damage the Company's reputation and business. The Company is currently not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on the Company's consolidated results of operations or financial position.

Leases

Rent expense was approximately $52,000 and $104,000 for the three and six months ended June 30, 2014 and $38,000 and $74,000 for the three and six months ended June 30, 2013, respectively.

The following is a schedule of non-cancellable future minimum lease payments for operating leases as of June 30, 2014 (in thousands):

Years ending December 31:
2014 (Six Months)	$	113
2015	38
Total	$	151

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Basis of Accounting

Basis of Presentation

The Company has a limited operating history and the sales and income potential of the Company's business and addressable market are unproven. The Company has experienced net losses each year since its inception and, as of June 30, 2014, had an accumulated deficit of $92.8 million. The Company anticipates that it will continue to incur net losses into the foreseeable future as it continues the development and commercialization of its lead drug candidate OCR-002 and expands its corporate infrastructure. Based on the Company's operating plan, the Company believes its current working capital is sufficient to fund its operations through at least the next twelve months.

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with United States of America generally accepted accounting principles ("U.S. GAAP") for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission. The financial statements and related notes do not include all information and footnotes required by U.S. GAAP for annual reports. This quarterly report should be read in conjunction with the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2013.

Unaudited Interim Financial Information

Unaudited Interim Financial Information

The accompanying interim consolidated financial statements and related disclosures are unaudited, have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the results of operations for the periods presented. The year-end balance sheet was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The consolidated results of operations for any interim period are not necessarily indicative of the results to be expected for the full year or for any other future year or interim period.

Use of Estimates

Use of Estimates

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

Discontinued Operations

Discontinued Operations

On September 11, 2013, the Board of Directors approved a restructuring plan related to the operations of Tranzyme Pharma Inc. and its Sherbrooke, Quebec facility ("Tranzyme Pharma"), whereby the Company closed the operations of the facility effective as of November 11, 2013. On December 13, 2013, the Company entered into a Technology Transfer and License Agreement to sell the Company’s MATCH discovery platform and license the related intellectual property rights. The Company concluded that since Tranzyme Pharma's operations and the MATCH discovery platform comprised a component with distinct operations and cash flows that would be eliminated from ongoing operations, and the Company would not have significant involvement after the disposal, these components would be accounted for as discontinued operations. The results of operations of the components to be disposed of, related restructuring costs and gain on disposal of assets have been classified as net income from discontinued operations from their date of acquisition on July 15, 2013 through June 30, 2014. The assets and liabilities of Tranzyme Pharma have been classified as assets and liabilities, respectively, of discontinued operations. Unless noted otherwise, discussion in these notes to the financial statements pertain to our continuing operations.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update, or ASU, No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (topic 360); Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU 2014-08 provides additional requirements to classify a disposal of a component of an entity or a group of components of an entity in discontinued operations only if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014, with an option for early adoption. The Company intends to adopt this guidance at the beginning of our first quarter of fiscal year 2015, and does not expect the adoption of this standard will have a material impact on the Company’s financial statements.

In June 2014, the FASB issued Accounting Standards Update, or ASU, No. 2014-10, Development Stage Entities (Topic 915). ASU 2014-10 removes the distinction between development stage entities and other reporting entities in U.S. GAAP and eliminates the requirement to label financial statements as those of a development stage entity and eliminates the requirement to present inception to date information in the statements of income, cash flows and shareholder equity. The guidance is applied retroactively and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014, with an option for early adoption. The Company early adopted this guidance in the second quarter of 2014, and as a result, has removed the label “A Development Stage Company” from its financial statements and accompanying notes and eliminated the inception to date information from the Consolidated Statements of Operations and Comprehensive Loss and Consolidated Statements of Cash Flows. Other than presentation, the adoption of this standard did not have a material impact on the Company’s financial statements.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares and common share equivalents outstanding for the period. Common stock equivalents are only included when their effect is dilutive. Potentially dilutive securities which include convertible preferred stock, warrants, convertible notes payable and outstanding stock options under the stock option plan have been excluded from the computation of diluted net loss per share as they would be anti-dilutive. For all periods presented, there is no difference in the number of shares used to compute basic and diluted shares outstanding due to the Company’s net loss position. All share and per share amounts for all periods presented in the following table have been adjusted retroactively to reflect the exchange for Tranzyme, shares as of the date of the Merger.

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Discontinued Operations (Details) (Tranzyme Pharma Inc. [Member], USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014	Dec. 13, 2013 Customer Agreements And Intellectual Property [Member]
Restructuring Cost and Reserve [Line Items]
Sale price for discontinued operations			$ 4,000,000
Income due to the true-up of certain Canadian tax liabilities	20,000
Net gain on disposal of assets	0	1,149,000
Recognition of accumulated translation adjustments upon deconsolidation of subsidiary	$ 0	$ (6,000)

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Net Loss Per Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Computation of net loss per share

The following table presents the computation of net loss per share (in thousands, except share and per share data):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Numerator
Net loss from continuing operations	$	(7,243	)	$	(2,087	)	$	(12,425	)	$	(2,818	)
Net income from discontinued operations	20			—			1,137			—
Net loss	$	(7,223	)	$	(2,087	)	$	(11,288	)	$	(2,818	)
Denominator
Weighted average common shares outstanding used to compute net loss per share, basic and diluted	15,539,053			643,674			15,480,469			640,465
Net loss per share of common stock, basic and diluted
Net loss per share from continuing operations	$	(0.46	)	$	(3.24	)	$	(0.80	)	$	(4.40	)
Net income per share from discontinued operations	—			—			0.07			—
Net loss per share	$	(0.46	)	$	(3.24	)	$	(0.73	)	$	(4.40	)

Potentially dilutive securities not included in the calculation of dilutive net loss per share

The following weighted average outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share of common stock for the periods presented because including them would have been anti-dilutive:

	Three Months Ended June 30,		Six Months ended June 30,
	2014	2013	2014	2013
Convertible preferred stock	—	4,840,324	—	4,840,324
Convertible preferred stock warrants	—	16,494	—	21,386
Common stock warrants	938,882	131,462	938,882	131,462
Common stock options	1,731,347	452,898	1,744,033	565,633
Total	2,670,229	5,441,178	2,682,915	5,558,805

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Balance Sheet Components (Available For Sale Investments) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		$ 31,677
Unrealized Gains		14
Unrealized Losses		(11)
Estimated Fair Value		31,680
Short-term investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	25,607	30,162
Unrealized Gains	4	14
Unrealized Losses	0	(9)
Estimated Fair Value	25,611	30,167
Short-term investments [Member] | Commercial Paper [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	5,996	15,232
Unrealized Gains	3	14
Unrealized Losses	0	0
Estimated Fair Value	5,999	15,246
Short-term investments [Member] | Corporate Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	19,611	14,930
Unrealized Gains	1	0
Unrealized Losses	0	(9)
Estimated Fair Value	19,612	14,921
Long-term investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		1,515
Unrealized Gains		0
Unrealized Losses		(2)
Estimated Fair Value		1,513
Long-term investments [Member] | Corporate Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		1,515
Unrealized Gains		0
Unrealized Losses		(2)
Estimated Fair Value		$ 1,513

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Subsequent Events (Details) (Subsequent Event [Member], IPO [Member], Common Stock [Member], USD $)	0 Months Ended
	Jul. 10, 2014	Jul. 10, 2014
Subsequent Event [Member] | IPO [Member] | Common Stock [Member]
Subsequent Event [Line Items]
Stock issued (in shares)	4,200,000
Share price		$ 6.00
Gross proceeds from stock offering	$ 25,200,000.0
Underwriting discount and other offering expenses		$ 1,500,000

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Consolidated Statements of Operations and Comprehensive Loss (Parenthetical) (Tranzyme Pharma Inc. [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014
Tranzyme Pharma Inc. [Member]
Net gain on disposal of assets	$ 0	$ 1,149

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Balance Sheet Components

6 Months Ended

Jun. 30, 2014

Balance Sheet Components [Abstract]

Balance Sheet Components

Balance Sheet Components

Investments

The following table summarizes the Company's available for sale investments as of June 30, 2014 (in thousands).

	Maturity (in Years)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Short-term investments:
Commercial paper	1 or less	$	5,996	$	3	$	—	$	5,999
Corporate debt securities	1 or less	19,611		1		—		19,612
Total investments		$	25,607	$	4	$	—	$	25,611

The following table summarizes the Company's available for sale investments as of December 31, 2013 (in thousands).

	Maturity (in Years)	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Short-term investments:
Commercial paper	1 or less	$	15,232	$	14	$	—		$	15,246
Corporate debt securities	1 or less	14,930		—		(9		)	14,921
Total		30,162		14		(9		)	30,167
Long-term investments:
Corporate debt securities	More than 1	1,515		—		(2		)	1,513
Total		1,515		—		(2		)	1,513
Total investments		$	31,677	$	14	$	(11	)	$	31,680

At each reporting date, the Company performs an evaluation of impairment to determine if the unrealized losses are other-than-temporary. For debt securities, management determines whether it intends to sell the impaired securities, and if there is no intent or expected requirement to sell, management considers whether it is likely that the amortized cost will be recovered. The Company does not consider unrealized losses on its debt investment securities to be credit-related. These unrealized losses relate to changes in interest rates and market spreads subsequent to purchase. The Company has not made a decision to sell securities with unrealized losses and believes it is more likely than not it would not be required to sell such securities before recovery of its amortized cost. There have been no other than temporary losses recognized in earnings.

Property and Equipment

Property and equipment, net were as follows (in thousands):

	Useful Life	June 30,			December 31,
	(in years)	2014			2013
Computer equipment and software	3 years	$	43		$	40
Office furniture and equipment	5 years	51			43
Construction in progress	5 years	25			—
		119			83
Accumulated depreciation		(44		)	(24		)
Property and equipment, net		$	75		$	59

Total depreciation expense was $10,000 and $2,000 for the three months ended June 30, 2014 and 2013, respectively, and $20,000 and $5,000 for the six months ended June 30, 2014 and 2013, respectively. 

Acquired intangible assets

The net book value of acquired intangible assets were as follows (in thousands):

	June 30,			December 31,
Customer Agreements:	2014			2013
Carrying value	$	410		$	410
Accumulated amortization	(157		)	(75		)
Intangible assets, net	$	253		$	335
Weighted average remaining life (in years)	1.5			2.0

Total amortization expense was $41,000 and $0 for the three months ended June 30, 2014 and 2013, respectively, and $82,000 and $0 for the six months ended June 30, 2014 and 2013, respectively. 

The estimated future amortization expense of purchased intangible assets as of June 30, 2014 is $0.1 million and $0.2 million for the six-months and year ended December 31, 2014 and 2015 respectively.

Accrued Liabilities

Accrued liabilities were as follows (in thousands):

	June 30,		December 31,
	2014		2013
Accrued clinical trials	$	1,056	$	417
Accrued compensation	333		1,093
Accrued consulting	362		315
Other accrued liabilities	149		77
	$	1,900	$	1,902

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Balance Sheet Components (Property and Equipment) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 119		$ 119		$ 83
Less accumulated depreciation	(44)		(44)		(24)
Property and equipment, net	75		75		59
Depreciation expense	10	2	20	5
Computer equipment and software [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	43		43		40
Useful life			3 years
Office furniture and equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	51		51		43
Useful life			5 years
Construction in progress [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 25		$ 25		$ 0
Useful life			5 years

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Net Loss Per Share (Schedule of Basic and Diluted Loss Per Share) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Numerator
Net loss from continuing operations	$ (7,243)	$ (2,087)	$ (12,425)	$ (2,818)
Net income from discontinued operations	20	0	1,137	0
Net loss	$ (7,223)	$ (2,087)	$ (11,288)	$ (2,818)
Denominator
Weighted average common shares outstanding used to compute net loss per share, basic and diluted	15,539,053	643,674	15,480,469	640,465
Net loss per share of common stock, basic and diluted
Net loss per share from continuing operations	$ (0.46)	$ (3.24)	$ (0.80)	$ (4.40)
Net income per share from discontinued operations	$ 0.00	$ 0.00	$ 0.07	$ 0.00
Net loss per share	$ (0.46)	$ (3.24)	$ (0.73)	$ (4.40)

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Discontinued Operations (Tables)

6 Months Ended

Jun. 30, 2014

Restructuring and Related Activities [Abstract]

Discontinued operations included the Income Statement and Balance Sheets

The results of Tranzyme Pharma and related asset groups are disclosed as discontinued operations in the Consolidated Statements of Operations and Comprehensive Loss for the period presented (in thousands).

	Three Months Ended June 30, 2014		Six Months Ended June 30, 2014
Proceeds recognized pursuant to Technology Transfer and License Agreement	$	—	$	4,000
Less carrying value of assets sold:
Intangible assets	—		(2,053		)
Property and equipment	—		(356		)
Goodwill	—		(442		)
Net gain on disposal of assets	—		1,149
Other income (expenses) of discontinued operations	20		(6		)
Recognition of accumulated translation adjustments upon deconsolidation of subsidiary	—		(6		)
Net income from discontinued operations	$	20	$	1,137

The assets and liabilities of Tranzyme Pharma and related asset groups are presented as held for disposal in the Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013. The carrying amount of assets and liabilities are as follows (in thousands):

	June 30, 2014		December 31, 2013
Prepaid expenses and other current assets	$	—	$	178
Property and equipment, net	—		356
Intangible assets, net	—		2,053
Goodwill	—		442
Assets of discontinued operations	$	—	$	3,029
Accounts payable	$	95	$	106
Deposit on sale of assets	—		3,000
Accrued liabilities	—		397
Liabilities of discontinued operations	$	95	$	3,503

Schedule of estimated expenses to be incurred and expensed

The following table summarizes the Company’s restructuring activities for the six months ended June 30, 2014 in thousands:

	Post- Employment Benefits			Moving and Shipping Costs			Operating Activities			Total
Accrued restructuring at December 31, 2013	$	392		$	99		$	11		$	502
Cash payments and other settlements	(392		)	(4		)	(11		)	(407		)
Accrued restructuring at June 30, 2014	$	—		$	95		$	—		$	95