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 March 31, 2016

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) 475-0158

(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 x
Non-Accelerated Filer o	Smaller Reporting Company o
(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 April 29, 2016 was 21,307,129.

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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 number, timing, design, results and implementation of our clinical trials and nonclinical activities for OCR-002 and the timing of the availability of data from these trials and activities; 

• our ability to enroll patients, and the timing of enrollment, in our Phase 2b clinical trial of 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; 

• the progress, timing and amount of expenses associated with our research, development and commercialization activities for OCR-002; 

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

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

• the commercial success and market acceptance of OCR-002, if approved;

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

• 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 ability to comply with the covenants in our credit facility;

• 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, cash and expense levels and liquidity sources; and

• other risks and uncertainties, including those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q, Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015 and our other prior filings with the SEC.

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 II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q, Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015 and our other prior filings with the SEC. 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 Condensed Consolidated Financial Statements	4
	Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015	4
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2016 and 2015	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015	6
	Notes to Condensed Consolidated Financial statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4	Controls and Procedures	21
Part II.	Other Information	21
Item 1	Legal Proceedings	21
Item 1A	Risk Factors	21
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3	Defaults Upon Senior Securities	21
Item 4	Mine Safety Disclosures	22
Item 5	Other Information	22
Item 6	Exhibits	22
	Signatures	23

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PART I - FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements

Ocera Therapeutics, Inc. Condensed Consolidated Balance Sheets (In Thousands, Except Share and Per Share Amounts)
	March 31,			December 31,
	2016			2015
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	32,432		$	35,921
Short-term investments, available-for-sale	7,420			7,415
Accounts receivable	93			59
Prepaid expenses and other current assets	559			627
Total current assets	40,504			44,022
Property and equipment, net	82			94
Deposits	—			26
Goodwill	595			595
Total assets	$	41,181		$	44,737
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	1,285		$	701
Accrued liabilities	3,632			3,133
Notes payable - current	104			—
Total current liabilities	5,021			3,834
Notes payable - long term	9,451			9,508
Other liabilities	—			1
Total liabilities	14,472			13,343
Commitments and contingencies (Note 9)
Stockholders' equity:
Preferred stock - $0.00001 par value, 5,000,000 shares authorized and no shares issued or outstanding.	—			—
Common stock - $0.00001 par value, 100,000,000 shares authorized, 21,307,129 issued and outstanding at March 31, 2016 and 20,695,160 shares issued and outstanding at December 31, 2015.	—			—
Additional paid-in capital	165,655			162,832
Accumulated other comprehensive income (loss)	1			(5		)
Accumulated deficit	(138,947		)	(131,433		)
Total stockholders' equity	26,709			31,394
Total liabilities and stockholders' equity	$	41,181		$	44,737

See the accompanying notes to the unaudited consolidated financial statements.

4

Ocera Therapeutics, Inc. Condensed Consolidated Statements of Operations and Comprehensive Loss (In Thousands, Except Share and Per Share Amounts) (unaudited)
	Three Months Ended March 31,
	2016			2015
Royalty revenue	$	33		$	31
Operating expenses:
Research and development	4,747			4,398
General and administrative	2,554			2,256
Amortization of intangibles	—			41
Total operating expenses	7,301			6,695
Other income (expense):
Interest and other income	33			27
Interest and other expense	(279		)	(14		)
Other income (expense), net	(246		)	13
Net loss	$	(7,514	)	$	(6,651	)
Net loss per share:
Net loss per share, basic and diluted	$	(0.36	)	$	(0.34	)
Weighted average number of shares used to compute net loss per share of common stock, basic and diluted	20,943,966			19,747,362
Comprehensive loss:
Net loss	$	(7,514	)	$	(6,651	)
Unrealized gain on investments	6			28
Comprehensive loss	$	(7,508	)	$	(6,623	)

See the accompanying notes to the unaudited consolidated financial statements.

5

Ocera Therapeutics, Inc. Condensed Consolidated Statements of Cash Flows (In Thousands) (unaudited)
	Three Months Ended March 31,
	2016			2015
Operating activities
Net loss	$	(7,514	)	$	(6,651	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	12			8
Amortization of intangibles	—			41
Stock-based compensation	1,106			965
Accretion of premium on investment securities	22			154
Noncash interest expense	47			—
Changes in operating assets and liabilities:
Accounts receivable	(34		)	31
Prepaid expenses and other assets	94			453
Accounts payable	544			88
Accrued liabilities	498			(8		)
Net cash used in operating activities	(5,225		)	(4,919		)
Investing activities
Purchase of short-term investments	(3,754		)	(13,414		)
Proceeds from maturities of short-term investments	3,733			18,500
Net cash provided by (used in) investing activities	(21		)	5,086
Financing activities
Proceeds from sale of common stock, net of underwriting commissions and issuance cost	1,746			—
Proceeds from exercise of common stock options	11			—
Net cash provided by financing activities	1,757			—
Net increase (decrease) in cash and cash equivalents	(3,489		)	167
Cash and cash equivalents—beginning of period	35,921			10,127
Cash and cash equivalents—end of period	$	32,432		$	10,294
Supplemental disclosures of cash flow information
Cash paid for interest	$	207		$	—
Supplemental schedule of noncash investing and financing activities
Issuance cost related to at the market equity program in accounts payable	$	40		$	—

See the accompanying notes to the unaudited consolidated financial statements.

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Ocera Therapeutics, Inc.

Notes to Condensed 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 which has been granted orphan drug designation and Fast Track status by the U.S. Food and Drug Administration for the treatment of hyperammonemia and resultant hepatic encephalopathy in patients with liver cirrhosis, acute liver failure and acute-on-chronic liver disease.

On July 15, 2013, Terrapin Acquisition, Inc., a Delaware corporation (“Merger Sub”), a 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 was 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. (“Ocera Subsidiary”).

The Company's business is subject to significant risks consistent with biopharmaceutical companies seeking to develop technologies and product candidates for human therapeutic use. These risks include, but are not limited to, uncertainties regarding research and development, access to capital, obtaining and enforcing patents, receiving regulatory approval and competition with other biotechnology and pharmaceutical companies.

The Company has a limited operating history and the sales and income potential of the Company's business and market are unproven. As of March 31, 2016, the Company has incurred losses since inception of $138.9 million. The Company anticipates that it will continue to incur net losses into the foreseeable future as it continues the development and commercialization of OCR-002 and as it expands its corporate infrastructure. Based on the Company's current operating plan, the Company believes its working capital is sufficient to fund its operations through at least the next twelve months.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company and our wholly-owned subsidiary 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. For interim reporting 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, 2015.

Unaudited Interim Financial Information

The accompanying interim condensed 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 condensed financial statements, but does not include all disclosures required by U.S. GAAP for complete financial statements. 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.

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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.

Short-term investments

All investments have been classified as "available-for-sale" and are carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities. Unrealized gains and losses are excluded from earnings and are reported as a component of accumulated comprehensive income. Realized gains and losses and declines in fair value judged to be other than temporary, if any, on available-for-sale securities are included in interest and other income (expense), net. The cost of securities sold is based on the specific-identification method. Interest on marketable securities is included in interest and other income.

Recent Accounting Pronouncements

Occasionally, new accounting standards are issued or proposed by the Financial Accounting Standards Board (the "FASB"), or other standards-setting bodies that the Company adopts by the effective date specified within the standard. Unless otherwise discussed, standards that do not require adoption until a future date are not expected to have a material impact on the Company's condensed consolidated financial statements upon adoption.

(i) New Accounting Updates Recently Adopted

 In April 2015, the FASB issued Accounting Standards Update, or ASU 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. ASU 2015-05 relates to a customer’s accounting for fees paid in a cloud computing arrangement. This guidance requires that management evaluate each cloud computing arrangement in order to determine whether it includes a software license that must be accounted for separately from hosted services. The Company adopted this ASU with prospective application in the first quarter of 2016. The guidance did not have a material impact in the condensed consolidated financial results.

(ii) Recent Accounting Updates Not Yet Effective

In February 2016, the FASB issued Accounting Standards Update, or ASU 2016-02, Leases, to increase transparency and comparability among organizations by requiring recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements. The standard will become effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The guidance is required to be adopted at the earliest period presented using a modified retrospective approach. The Company is currently evaluating the impact of the adoption of this standard on our condensed consolidated financial statements.

In March 2016, the FASB issued Accounting Standards Update, or ASU 2016-06, Derivatives and Hedging (Topic 815), Contingent Put and Call Options in Debt Instruments. This ASU clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments in this ASU is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence.  The new standard simplifies the embedded derivative analysis for debt instruments containing contingent call or put options by removing the requirement to assess whether a contingent event is related to interest rates or credit risks. This guidance should be applied on a modified retrospective basis to existing debt instruments as of the beginning of the fiscal year in which the amendments are effective, and is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements.

In March 2016, the FASB issued Accounting Standards Update, or ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), Compensation - Stock Compensation. The new guidance simplifies several aspects of the accounting for share-based payments, including immediate recognition of all excess tax benefits and deficiencies in the income statement, changing the threshold to qualify for equity classification up to the employees' maximum statutory tax rates, allowing an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur, and clarifying the classification on the statement of cash flows for the excess tax benefit and employee taxes paid when an employer withholds shares for tax-withholding purposes. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, and interim periods within that reporting period. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements.

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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 March 31, 2016, and December 31, 2015, 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: Inputs which include 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 reporting entity to develop its own assumptions.

None of the Company’s non-financial assets and liabilities are recorded at fair value on a non-recurring basis. No transfers between levels have occurred during the periods presented.

Assets measured at fair value on a recurring basis as of March 31, 2016 are as follows (in thousands):

	Balance as of March 31, 2016		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	$	27,878	$	27,878	$	—	$	—
Commercial paper	2,499		—		2,499		—
Corporate debt securities	9,308		—		9,308		—
Total assets	$	39,685	$	27,878	$	11,807	$	—

Assets measured at fair value on a recurring basis as of December 31, 2015 are as follows (in thousands):

	Balance as of December 31, 2015		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	$	34,806	$	34,806	$	—	$	—
Corporate debt securities	7,415		—		7,415		—
Total assets	$	42,221	$	34,806	$	7,415	$	—

The Company estimates the fair values of commercial paper and corporate debt securities by taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker quotes on the same or similar securities; issuer credit spreads; benchmark securities; prepayment or default projections based on historical data; and other observable inputs.

The estimated fair value of the Company's notes payable, considering level 2 inputs, approximates their carrying value based upon the borrowing terms and conditions currently available to the Company.

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4. Balance Sheet Components

Investments

The following table summarizes the Company's available for sale investments as of March 31, 2016(in thousands):

	Maturity (in Years)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Short-term investments:
Commercial paper	1 or less	$	2,498	$	1	$	—	$	2,499
Corporate debt securities	1 or less	4,921		—		—		4,921
Total short-term investments		$	7,419	$	1	$	—	$	7,420

The following table summarizes the Company's available for sale investments as of December 31, 2015 (in thousands):

	Maturity (in Years)	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Short-term investments:
Corporate debt securities	1 or less	$	7,420	$	—	$	(5	)	$	7,415
Total short-term investments		$	7,420	$	—	$	(5	)	$	7,415

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 that 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 in any of the periods presented.

Accrued Liabilities

Accrued liabilities were as follows (in thousands):

	March 31,		December 31,
	2016		2015
Clinical trials	$	2,646	$	1,666
Compensation and related expenses	547		993
Professional services	216		319
Interest expense	135		110
Other	88		45
Total accrued liabilities	$	3,632	$	3,133

5. Notes Payable

On July 30, 2015, the Company and Ocera Subsidiary entered into a Loan and Security Agreement (the “Loan Agreement”) with Oxford Finance LLC (“Oxford”) and Silicon Valley Bank (“SVB”) (collectively, the “Lenders”). The Loan Agreement provides for up to $20 million in new term loans (the “Term Loan Facility”), $10 million of which was funded on July 30, 2015. The remaining $10 million is available for draw until December 31, 2016 at the Company’s discretion, subject to achievement of certain financial and clinical milestones. The milestones will be satisfied if the Company (a) has raised proceeds of at least $15 million from the sale of equity securities or upfront payments from a partnership agreement and (b) achieved positive data from its ongoing Phase 2b clinical trial of OCR-002.

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The annual interest rate for the initial $10 million funding is 8.275%, and the interest rate for the second tranche will be fixed upon drawdown at an annual rate that is greater of 8.275% or 8.085% plus the 30-day U.S. LIBOR rate. Loan payments are interest-only until February 1, 2017, followed by 30 equal monthly payments of principal and interest through the scheduled maturity date of August 1, 2019 if the second tranche is not drawn. If the second tranche is drawn, the interest-only period continues to August 1, 2017, followed by 24 equal monthly payments. In addition, a final payment equal to 3% of the aggregate amount drawn will be due at maturity or on earlier repayment. If the Company prepays all or a portion of the loans, a prepayment fee of between 1-3% of the principal amount prepaid will also be due depending on the timing of the prepayment.

At the initial funding, the Company received net proceeds of $9.7 million after fees and expenses. These fees and expenses are being accounted for as a debt discount and classified within notes payable on the Company’s balance sheet. Legal and consulting fees are presented in the balance sheet as a direct deduction from the carrying amount of the notes liability, consistent with debt discounts. Debt discounts, issuance costs and the final payment are being amortized or accreted as interest expense over the term of the loan using the effective interest method.

In connection with the Loan Agreement, the Company issued the Lenders warrants to purchase an aggregate of 97,680 shares of the Company's common stock at an exercise price of $4.095 per share. The Company recorded $0.3 million for the warrants as debt discount within notes payable and an increase to additional paid-in capital on the Company’s balance sheet. As of March 31, 2016, the warrants remained outstanding and exercisable. The debt discount is being amortized as interest expense over the term of the loan using the effective interest method.

The Term Loan Facility is secured by substantially all of the assets of the Company and its subsidiaries, except that the collateral does not include any intellectual property held by the Company or its subsidiary. However, the Company has agreed not to encumber any of the intellectual property of the Company or its subsidiary. The Loan Agreement contains customary representations, warranties and covenants by the Company, and customary indemnification obligations and events of default. The Company was in compliance with all covenants set forth in the Loan Agreement as of March 31, 2016.

The Company recorded interest expense related to the Term Loan Facility of $0.3 million for the three months ended March 31, 2016. The annual effective interest rate on the note payable, including the amortization of the debt discounts and accretion of the final payments, is 11.72%.

Future payments under the Loan Agreement as of March 31, 2016 are as follows (in thousands):

Years ending December 31:
2016 (Remaining Nine Months)	$	621
2017	3,839
2018	4,442
2019	3,261
Total minimum payments	12,163
Less amount representing interest	2,163
Notes payable, gross	10,000
Unamortized discount on notes payable	(445		)
Notes payable, balance	9,555
Less current portion of notes payable	104
Non-current portion of notes payable	$	9,451

6. Stockholders' Equity

On May 15, 2015, the Company entered into a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”), pursuant to which the Company may issue and sell shares of its common stock having aggregate sales proceeds of up to $25,000,000 from time to time through an “at the market” equity program under which Cowen acts as sales agent.

During the three months ended March 31, 2016, the Company sold an aggregate of 600,000 shares of common stock under the Sales Agreement, at an average price of approximately $3.00 per share, for gross proceeds of $1.80 million and net proceeds of $1.75 million after deducting commissions and other transactions costs. As of March 31, 2016, $19.5 million of common stock remained available to be sold under the Sales Agreement, subject to certain conditions specified therein.

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7. Stock-Based Compensation

The Company’s stock option activity and related information for the three months ended March 31, 2016 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, 2015	1,299,301		2,429,511		$	7.00	8.01	$	287
Stock options granted	(1,406,000	)	1,406,000		$	3.00
Stock options canceled	106,968		(106,968	)	$	4.81
Stock options exercised	—		(11,969	)	$	0.92
Balance at March 31, 2016	269		3,716,574		$	5.57	8.41	$	237
At March 31, 2016:
Vested and expected to vest			3,562,789		$	5.64	8.37	$	237
Exercisable			1,186,221		$	8.22	6.61	$	237

The aggregate intrinsic value of options exercised under all option plans was $25,000 and $0 for the three months ended March 31, 2016 and 2015, respectively, determined as of the date of option exercise.

The Company recognized stock-based compensation expense within the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):

	Three Months Ended March 31,
	2016		2015
Research and development	$	207	$	209
General and administrative	899		756
Total	$	1,106	$	965

The above table includes $10,000 of stock compensation expense for the three months ended March 31, 2016 related to stock option grants to consultants.

At March 31, 2016 there were 136,000 unvested options outstanding with performance conditions related to the achievement of certain clinical milestones. During the three months ended March 31, 2016, no expense has been recorded for the performance based options as it was not yet probable that such milestones would be met.

In March 2016, the Company amended its non-employee director compensation policy to increase the annual cash compensation for each non-employee member of its board of directors from $30,000 to $35,000, the annual cash compensation of the audit committee chairperson from $15,000 to $17,500 and the annual stock option grant from 10,000 to 12,500 shares.

As of March 31, 2016, there was unrecognized stock compensation expense of $8.8 million related to stock options and the Company expects to recognize those costs over a weighted average period of 2.47 years.

12

Stock-based compensation expense 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 all stock options granted was estimated using the following weighted-average assumptions:

	Three Months Ended March 31,
	2016	2015
Expected dividend yield	—	—
Risk-free interest rates	1.33% - 1.97%	1.52%
Expected term in years	4.66 - 8.04	6.08
Expected volatility	75% - 92%	91%

On January 6, 2016 the Company granted certain of its executive officers non-qualified stock options to purchase 206,625 shares of the Company’s common stock that vest on a monthly basis in equal installments over 48 months following the grant date if the Company's stock price equals or exceeds $6.00 for 20 consecutive trading days on or before June 30, 2017. The options expire ten years from the date of the grant.

The weighted-average fair values of these options was determined using a Monte Carlo simulation model incorporating the following assumptions:

	Three Months Ended March 31,
	2016	2015
Expected dividend yield	—	—
Risk-free interest rates	1.82% - 2.05%	—%
Expected term in years	6.02 - 8.00	—
Expected volatility	77% - 89%	—%
Weighted-average fair value per share	1.33 - 1.42	—

The estimated expense for these awards is being recognized on an accelerated basis over the estimated requisite service period, with no adjustments in the future periods based upon the Company's actual common stock price. During the three months ended March 31, 2016, the Company recorded $62,000 of share-based compensation expense in connection with the market condition stock option awards described above.

8. 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 warrants and outstanding stock options have been excluded from the computation of diluted net loss per share as the effect of their inclusion would be considered 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.

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

	Three Months Ended March 31,
	2016			2015
Numerator
Net loss	$	(7,514	)	$	(6,651	)
Denominator
Weighted average common shares outstanding used to compute net loss per share, basic and diluted	20,943,966			19,747,362
Net loss per share of common stock, basic and diluted
Net loss per share	$	(0.36	)	$	(0.34	)

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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 as the effect of their inclusion would have been considered anti-dilutive:

	Three Months Ended March 31,
	2016	2015
Common stock warrants	1,026,249	932,535
Common stock options	3,630,529	2,039,050
Total	4,656,778	2,971,585

9. 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 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 $95,000 and $57,000 for the three months ended March 31, 2016 and 2015, respectively.

The following is a schedule of non-cancellable future minimum lease payments for operating leases as of March 31, 2016 (in thousands):

Years ending December 31:
2016 (Remaining Nine Months)	284
2017	15
Total	$	299

10. Subsequent Events

In April 2016, the Company’s board of directors approved, subject to stockholder approval at the Company’s 2016 annual meeting of shareholders, an amendment and restatement of the Company’s Third Amended and Restated 2011 Stock Option and Incentive Plan (the “2011 Plan”) to, among other things, increase the maximum number of shares that may be issued under the 2011 Plan from 3,602,328 to 5,002,328 shares. The amendment and restatement of the 2011 Plan will be voted on by the Company’s stockholders on at the annual meeting of shareholders scheduled for June 14, 2016.

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

The following discussion should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015 and the unaudited consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. 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 II, Item 1 of this Quarterly Report on Form 10-Q, Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2015 and our other filings with the SEC, our actual results could differ materially from those anticipated in these forward-looking statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Overview

We are a clinical-stage biopharmaceutical company focused on acute and chronic orphan liver diseases. Our initial focus is on the development and commercialization of a clinical candidate, OCR-002, for the treatment of hepatic encephalopathy, or HE. HE is a serious complication of liver cirrhosis, or 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. Although the exact cause of HE is not completely understood, there is growing evidence that elevated ammonia is a primary driver of HE, and that lowering ammonia may be beneficial to patients suffering from HE. Common causes of liver malfunction leading to elevated ammonia levels and HE include alcoholism, viral hepatitis and autoimmune diseases, non-alcoholic steatohepatitis, or NASH, as well as obesity, Type II diabetes, and acetaminophen overdose. It is estimated that in the United States there are approximately eight million individuals with some form of chronic liver disease, of which one million have cirrhosis. Of the one million individuals in the United States that have cirrhosis, it is estimated that approximately 500,000 are at risk for developing HE.

OCR-002 is a novel molecule, ornithine phenylacetate, which functions as an ammonia scavenger. In pre-clinical studies, OCR-002 significantly reduced arterial ammonia and cerebral edema in an animal model of chronic liver disease and significantly attenuated arterial ammonia, extracellular brain ammonia and intracranial pressure in a second animal model of acute liver failure.

We are currently conducting a randomized, placebo-controlled double blind Phase 2b clinical trial to evaluate the safety and efficacy of intravenous administration of OCR-002 in reducing the severity of HE symptoms among hospitalized HE patients. In March 2015, an independent data monitoring committee, or DMC, conducted an interim analysis, reporting that the trial was not futile and that no clinically significant safety concerns were observed. In addition, the DMC recommended that we continue the trial and increase target enrollment from 140 patients to approximately 230 patients. This sample size recommendation allows the trial to maintain 80% statistical power to observe the treatment effect at the conclusion of the trial that was observed by the DMC at the time of the interim analysis. The trial is currently being conducted in approximately 100 sites worldwide and as of April 29, 2016, 165 patients have been enrolled in total. We expect to complete enrollment in the fourth quarter of 2016 and announce topline data in the first quarter of 2017.

We are also developing an oral form of OCR-002 with the goal of providing continuity of care for HE patients post discharge in order to prevent subsequent episodes of acute HE. In the fourth quarter of 2015, we completed a Phase 1 clinical trial with oral formulations of OCR-002 in healthy subjects. This open label, single-dose, five treatment, five-period crossover trial evaluated the pharmacokinetic, or pK, safety and tolerability of three prototype, extended-release oral formulations of OCR-002 compared to an immediate release oral solution of OCR-002 and the FDA approved ammonia-lowering agent, glycerol phenylbutyrate (RAVICTI®). Glycerol phenylbutyrate is a pre-pro-drug of phenylacetate, or PAA, a component of OCR-002. The results of this trial demonstrated a robust, extended-release pattern for all three pilot OCR-002 extended-release formulations, with mean plasma phenylacetate concentrations exceeding those achieved with RAVICTI® at all time points for at least 12 hours post-dose. In addition, the concentration of phenylacetylglutamine, or PAGN, the end-product responsible for clearing ammonia, was greater in both plasma and urine for all three OCR-002 extended-release dosage forms than RAVICTI® at an approximately equivalent molar PAA dose. Based on the strength of these results and the prior clinical proof of concept established with RAVICTI® in preventing recurrent HE in patients suffering from liver cirrhosis and a prior history of HE, we plan to continue development of oral OCR-002 and expect to initiate a two-part Phase 1 clinical trial in patients with cirrhosis in the second half of 2016. Part A will evaluate the pK and bioavailability of a single oral dose of OCR-002 in cirrhotic patients dosed under certain conditions. Part B is expected to be a multi-dose study which will include the evaluation of steady state pK and the formation of PAGN. We expect enrollment in Part A to begin in the third quarter of 2016 with data anticipated by year-end 2016. We expect to complete Part B of this study, with data available, in the first half of 2017.

In 2012, we completed a Phase 1 pharmacokinetic and safety clinical trial of the intravenous form of OCR-002. A Phase 2a investigator-sponsored trial in Spain evaluated OCR-002 in patients with upper gastrointestinal bleeding associated

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with liver cirrhosis. These patients tend to have elevated ammonia levels because they swallow blood, which produces more ammonia as it is digested. In the first part of this trial, a 10-patient open label safety cohort, OCR-002 was shown to lower ammonia when administered as a continuous intravenous infusion of up to 10 grams per 24 hours. In February 2015, we announced the preliminary topline results of the second part of this trial, which was a randomized, placebo-controlled cohort of 38 patients. The data showed that over the first 12 hours of dosing, OCR-002 lowered ammonia by 19.6% compared to 3.2% in the placebo group, but this difference did not reach statistical significance. A statistically significant difference in urinary excretion of ammonia, as measured by PAGN, was observed and OCR-002 demonstrated a favorable safety profile and appeared to be well tolerated.

In addition, there is an investigator-sponsored Phase 2a clinical trial being conducted by the National Institutes of Health, or NIH, to evaluate the safety of OCR-002 in patients with hyperammonemia and HE due to acute liver failure or injury. In November 2015, the NIH announced preliminary pK data on 22 patients and concluded that OCR-002 was safe and well-tolerated at the levels administered, up to 10 grams per 24 hours. A correlation was observed between the doses administered and the drug levels seen in the blood, but even at the 10 gram dose, the investigators deemed the exposure of the drug to be below the desired range. As a result, they are now enrolling an additional 12 patients at a higher dose of 20 grams per 24 hours and expect to complete enrollment in the fourth quarter of 2016. Data is expected to be available from this trial in the first half of 2017.

Our strategy is to focus clinical development activities on the intravenous form of OCR-002 to treat acute HE in hospitalized patients and on the oral form of OCR-002, which will be directed to chronic care of HE patients.

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 consolidated 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 consolidated 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, 2015. For the three months ended March 31, 2016, 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 and wholly owned subsidiary of Tranzyme, Inc., a Delaware corporation, or Tranzyme, completed its merger, or the Merger, with and into Ocera Therapeutics, Inc., a private Delaware corporation, or 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., or Ocera Subsidiary.

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Results of Operations

Three Months Ended March 31, 2016 and 2015 (in thousands):

	Three Months Ended March 31,						$ Change
	2016			2015
Royalty revenue	$	33		$	31		$	2
Operating expenses:
Research and development	4,747			4,398			349
General and administrative	2,554			2,256			298
Amortization of intangibles	—			41			(41		)
Total operating expenses	7,301			6,695			606
Total other income (expense)	(246)			13			(259		)
Net loss	$	(7,514	)	$	(6,651	)	$	(863	)

Revenues

We generated $33,000 in royalty revenue for the three months ended March 31, 2016compared to$31,000in royalty revenue for the three months ended March 31, 2015.The revenue in both periods was attributable to a license agreement that we acquired from Tranzyme in connection with the Merger.

Costs and Expenses

Research and Development Expenses

Our research and development expenses increased by $0.3 million for the three months ended March 31, 2016 compared to the three months ended March 31, 2015. The increase in expenses was primarily due to increased personnel costs and related expenses due to higher headcount and increased expenses related to development of our oral formulation.

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 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 significant additional capital 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 $0.3 million for the three months ended March 31, 2016 compared to the three months ended March 31, 2015. The increase in general and administrative expenses was primarily due to an increase in personnel costs and related expenses, higher stock based compensation expense, and increases in our costs associated with legal and outside services fees.

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 potentially expand our infrastructure.

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Other Income (Expense)

Our other income (expense) increased by $0.3 million for the three months ended March 31, 2016, compared to the three months ended March 31, 2015. This increase was primarily due to interest accrued and amortization of debt issuance costs on notes payable related to the debt facility that closed in the third quarter of 2015, partially offset by interest income earned on our investment portfolio of $33,000 and $27,000 for the three months ended March 31, 2016, and 2015, respectively.

Liquidity and Capital Resources

Cash Flows

The following table summarizes our cash flows for the three months ended March 31, 2016 and 2015 (in thousands):

	Three Months Ended March 31,
	2016			2015
Cash flow from:
Operating activities	$	(5,225	)	$	(4,919	)
Investing activities	(21		)	5,086
Financing activities	1,757			—
Net increase (decrease) in cash and cash equivalents	$	(3,489	)	$	167

Comparison of the Three Months Ended March 31, 2016 and 2015

The primary use of cash in operating activities for the three months ended March 31, 2016 was the result of our net loss from operations of $7.5 million partially offset by changes in working capital of $1.1 million and non-cash charges of $1.2 million including stock-based compensation expense, accretion of premiums on investment of securities and non-cash interest expense. The primary use of cash in operating activities for the three months ended March 31, 2015 was the result of our net loss from operations of $6.7 million partially offset by changes in working capital of $0.6 million and non-cash charges of $1.2 million including stock-based compensation expense and accretion of premiums on investment securities.

Cash used in investing activities for the three months ended March 31, 2016 related to $3.8 million of investment purchases partially offset by maturities of $3.7 million. Cash provided by investing activities for the three months ended March 31, 2015 related to $18.5 million of investment maturities partially offset by purchases of investments of $13.4 million.

Cash provided by financing activities for the three months ended March 31, 2016 related to proceeds from issuance of common stock pursuant to the “at the market” equity program of $1.8 million and proceeds from exercise of stock options.

Debt Facility

On July 30, 2015, we entered into a Loan and Security Agreement, or the Loan Agreement, with Oxford Finance LLC and Silicon Valley Bank, or collectively, the Lenders. The Loan Agreement provides up to $20 million principal in new term loans, $10 million of which was funded on July 30, 2015. The remaining $10 million is available for draw until December 31, 2016 at the Company’s discretion, subject to achievement of certain financial and clinical milestones. We refer to this facility as the Term Loan Facility.

The term loan repayment schedule provides for interest only payments (i) through either February 1, 2017 or August 1, 2017 with respect to the first $10 million of the term loans, depending on whether the remaining term loans have been funded within a certain period set forth in the Loan Agreement, and (ii) through August 1, 2017 with respect to the remaining $10 million of term loans, in each case followed by consecutive equal monthly payments of principal and interest in arrears starting on such dates and continuing through the maturity date of August 1, 2019. The Loan Agreement provides for an interest rate equal to the greater of (i) 8.275% or (ii) the sum of the thirty-day U.S. LIBOR rate for five days prior to the funding date of the applicable term loan plus 8.085%. The Loan Agreement also provides for a final interest payment equal to 3.0% of the original principal amount of the first $10 million in term loans and 1.325% of the original principal amount of the remaining $10 million in term loans, or $432,500, which is due when the term loan becomes due or upon the prepayment of the facility.

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We have the option to prepay the outstanding balance of the term loan in full, subject to a prepayment fee of 1% to 3% depending upon when the prepayment occurs. The Term Loan Facility matures on August 1, 2019.

The Term Loan Facility is secured by substantially all of our assets and the assets of Ocera Subsidiary, Inc., except that the collateral does not include any intellectual property held by us or Ocera Subsidiary. However, pursuant to the terms of a negative pledge arrangement, we have agreed not to encumber any of the intellectual property of ours or our subsidiary. The Loan Agreement contains customary representations, warranties and covenants by us, which covenants limit our ability to convey, sell, lease, transfer, assign or otherwise dispose of certain of our assets; engage in any business other than the businesses we currently engage in or reasonably related thereto; liquidate or dissolve; make certain management changes; undergo certain change of control events; create, incur, assume, or be liable with respect to certain indebtedness; grant certain liens; pay dividends and make certain other restricted payments; make certain investments; enter into any material transactions with any affiliates, with certain exceptions; make payments on any subordinated debt; and permit certain of our subsidiaries to maintain, own or otherwise hold any material assets or conduct any business operations other than as disclosed to the Lenders. In addition, subject to certain exceptions, we and Ocera Subsidiary are required to maintain with SVB their respective primary deposit accounts, securities accounts and commodity accounts.

The Loan Agreement also contains customary indemnification obligations and customary events of default, including, among other things, our failure to fulfill certain of our obligations under the Loan Agreement, the occurrence of a material adverse change, which is defined as a material adverse change in our business, operations, or condition (financial or otherwise), a material impairment of the prospect of repayment of any portion of the loan, or a material impairment in the perfection or priority of the Lenders’ lien in the collateral or in the value of such collateral. In the event of default by us under the Loan Agreement, the Lenders would be entitled to exercise their remedies thereunder, including the right to accelerate the debt, upon which we may be required to repay all amounts then outstanding under the Loan Agreement, which could harm our financial condition.

Capital Resources and Funding Requirements

We will require significant additional funds to support future operations including our development activities associated with the intravenous and oral formulations of OCR-002. Our future funding requirements depend 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 planned and potential future clinical trials, the time and cost necessary to respond to technological, market or governmental developments, the cost of manufacturing adequate supplies of drug substance and drug product and the cost of filing, prosecuting, defending and enforcing any patent claims or other intellectual property rights.

We expect to fund our operations with our current cash and cash equivalents and proceeds from potential additional financing transactions and possible strategic opportunities. We believe that our current cash and cash equivalents will be sufficient to fund our operations for at least the next twelve months.

On May 15, 2015, we filed a shelf registration statement on Form S-3 under which we may offer shares of our common stock and preferred stock, various series of warrants to purchase common stock or preferred stock and debt securities, either individually or in units, in one or more offerings, up to a total dollar amount of $150,000,000. On May 15, 2015, we entered into a Sales Agreement, or the Sales Agreement, with Cowen and Company, LLC, or Cowen, pursuant to which we may issue and sell shares of our common stock for which we included a prospectus to our shelf registration statement on Form S-3, having aggregate sales proceeds of up to $25,000,000, from time to time, through an “at the market” equity program under which Cowen acts as sales agent. During the three month period ended March 31, 2016, we sold an aggregate of 600,000 shares of common stock under the Sales Agreement, at an average price of approximately $3.00 per share for gross proceeds of $1.80 million and net proceeds of $1.75 million after deducting commissions and other transactions costs. As of March 31, 2016, $19.5 million of common stock remained available to be sold under the Sales Agreement, subject to certain conditions specified therein.

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.

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Our ability to finance operations beyond our current resources will depend heavily on our ability to fully and timely enroll patients and 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, as is the case with our Term Loan Facility, results 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.

Contractual Obligations

The following table summarizes our future contractual obligations as of March 31, 2016(in thousands):

	Payments due by period
	Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years		Total
Note payable obligations, including interest (1)	$	621	$	8,281	$	3,261	$	—	$	12,163
Operating lease obligations	$	284	$	15	$	—	$	—	$	299
Other non-cancellable commitments (2)	$	200	$	—	$	—	$	—	$	200
Total	$	1,105	$	8,296	$	3,261	$	—	$	12,662

(1)    Upon the occurrence of an event of default, as defined in the Loan Agreement, and during the continuance of an event of default, a default interest rate of an additional 5% will be applied to the outstanding loan balances, and the Lenders may declare all outstanding obligations immediately due and payable.

(2)     Contractual obligations and commitments under clinical contracts that are non-cancellable.

We have license milestone obligation payments that are not included in the table above because the Company cannot determine when or if the payments will occur. In the normal course of business, we enter into various firm purchase commitments and other contractual obligations which are cancellable within ninety days or less and are not a part of the future contractual obligations table above.

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

For quantitative and qualitative disclosures about market risk affecting our company, see Item 7A: "Quantitative and Qualitative Disclosures about Market Risk" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015. Our exposure to foreign currency risk and market risk has not materially changed from that disclosed in our Annual Report.

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 March 31, 2016, 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.

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, 2015, 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, 2015.

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

None.

Item 3. Defaults Upon Senior Securities

None.

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Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

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

Exhibit Number	Description
10.1*†	Amended and Restated Employment Agreement dated as of April 8, 2016 by and between the Company and Linda Grais.
10.2*†	Amended and Restated Employment Agreement dated as of April 8, 2016 by and between the Company and Gaurav Aggarwal.
10.3*†	Ocera Therapeutics, Inc. Third Amended and Restated Non-Employee Director Compensation Policy.
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

†Indicates a management contract or compensation plan, contract or arrangement.

+Attached as Exhibits 101 to this report are the following financial statements from our Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations and Comprehensive Loss, (iii) the Condensed Consolidated Statements of Cash Flows and (iv) related notes to these financial statements tagged as blocks of text.

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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:	May 3, 2016	By:	/s/ Linda S. Grais, M.D.
			Linda S. Grais, M.D.
			President and Chief Executive Officer
Date:	May 3, 2016	By:	/s/ Michael Byrnes
			Michael Byrnes
			Chief Financial Officer and Treasurer

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EX-10.1

Exhibit 10.1

AMENDED AND RESTATED AGREEMENT OF EMPLOYMENT

THIS AMENDED AND RESTATED AGREEMENT OF EMPLOYMENT (the “Agreement”) is made as of the 8^th day of April, 2016 (the “Effective Date”), by and between Linda S. Grais, M.D. (hereinafter referred to as “Executive”), and Ocera Therapeutics, Inc., a corporation organized and existing under the laws of the State of Delaware (hereinafter referred to as the “Company”).

WITNESSETH:

WHEREAS, the Company and Executive previously entered in an employment agreement, dated December 19, 2013 (the “Prior Employment Agreement”), which the Company and Executive intend to replace with this Agreement; and

WHEREAS, Executive acknowledges that the restrictions against disclosures of certain information, the provisions regarding ownership of intellectual property and the other agreements set forth in this Agreement have constituted a substantial inducement to the Company to enter into this Agreement, and that none of such restrictions or agreements set forth in the Agreement will be unduly burdensome.

NOW, THEREFORE, in consideration of the premises set forth above and the mutual covenants and agreements contained herein, the parties hereby agree as follows:

1. Employment.

(a)The Company hereby continues to employ Executive as its President and Chief Executive Officer, and Executive hereby accepts such continued employment upon the terms and conditions set forth in this Agreement.

(a)Executive shall serve as a member of the Company’s Board of Directors (the “Board”) for so long as she is the Chief Executive Officer, subject to election by the Company’s stockholders, or until her earlier death or resignation.

2.    Term of Employment. The Company will continue to employ Executive, and Executive agrees to continue to remain in the full-time employ of the Company, until such employment is terminated by either party in accordance with the provisions hereof (the “Term”).

3. Duties and Authority of Executive.

(a)    Executive shall devote her full business time, attention and energies to performance of her duties hereunder as reasonably directed by the Board, and further agrees at all such times to act in a manner consistent with Company interests, and to perform such duties ably, faithfully and diligently. Executive shall be permitted to engage in family, civic, charitable and other non-commercially oriented activities but shall not engage in any outside work during business hours and/or commercially oriented activities which will materially affect, impede, prohibit, or restrict

her abilities to perform her obligations under this Agreement. Executive shall provide written notice to the Board prior to engaging in any material outside work or commercially oriented activity, and permission to engage in any such work or activity shall be granted solely in the discretion of the Board. Executive shall have the ability to engage in activities which are primarily personal investment activities and are not related to the business of the Company, provided, further, no such activity shall interfere, in any material respect, with Executive’s obligations under this Agreement. Notwithstanding the foregoing, and except to the extent the restrictions contained in Section 9 may apply, nothing in this Agreement shall prohibit Executive from: (i) participating in charitable and professional organizations in an unpaid capacity; or (ii) serving as a non-executive director of one or more other corporations so long as such activities are disclosed to the Board; in each case, in a manner, and to an extent, that will not materially interfere with her duties to the Company.

(b)    Executive shall be the senior employee of the Company and shall report directly to the Board. The Board shall have the power to direct, control and supervise the duties of Executive under this Agreement, as well as the manner of Executive’s performance of such duties; provided, however, that such duties are consistent with Executive’s position or other positions that she may hold from time to time and the Board shall not impose or permit to be imposed on its behalf any duties or constraints of any kind that would require Executive to violate any law or applicable government rule or regulation.

4. Compensation.

(a)    Salary. As Executive’s base salary for all services rendered to the Company during the term of this Agreement, in whatever capacity rendered, Executive shall receive an initial annual base salary of Four Hundred and Ninety One Five Dollars ($495,000), payable in accordance with the Company’s usual payroll practices for senior executives. Executive’s Base Salary, as in effect from time to time, shall not be decreased without Executive’s prior written consent. The base salary in effect at any given time is referred to herein as “Base Salary”. The Company hereby agrees that the Board or the Compensation Committee of the Board (the “Compensation Committee”) shall conduct an annual review of Executive’s Base Salary and will consider whether an increase in salary is appropriate, based upon Executive’s performance and Company performance.

(b)    Bonus. Executive shall be eligible to receive an annual bonus with a target amount equal to fifty percent (50%) of her annual Base Salary, with the actual amount determined by the Board or the Compensation Committee based upon the achievement of certain Executive performance goals and Company milestones identified by the Company after consultation with Executive. The annual target bonus in effect at any given time is referred to herein as the “Target Bonus.” Except as otherwise provided herein, to earn an annual bonus, Executive must be employed by the Company on the day such annual bonus is paid.

(c)    Stock Option. For the avoidance of doubt, the stock option described in Section 4(c) of Prior Employment Agreement shall be exercisable as to any vested shares until the earlier to occur of (x) the date that is five (5) years following the date of termination of Executive’s employment or (y) the expiration date of such stock option.

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5.    Benefits.

(a)    Executive shall be eligible to participate in all benefits made available to any employees of the Company including, without limitation, medical insurance (covering Executive and her dependents), vacation and/or retirement plans, and such benefits shall be provided in accordance with the Company’s personnel policies in effect from time to time during the Term. The Company reserves the right to change any Company benefit plan without Executive’s consent at any time.

(b)    Executive shall be eligible to participate in the Company’s 401(k) plan, subject to its terms and conditions.

(c)    Subject to Executive’s insurability at commercially reasonable rates, the Company shall maintain a life insurance policy on Executive’s life in the amount of Five Hundred Thousand Dollars ($500,000). The policy shall be issued by a company mutually acceptable to the Company and Executive. The Company shall pay one hundred percent (100%) of Executive’s premium on the policy and Executive shall be the owner of such policy and Executive shall designate the beneficiary of such policy.

(d)    Executive shall be entitled to four (4) weeks annual vacation leave, subject to the Company’s vacation policy in effect from time to time, no fewer than six (6) paid holidays per year and such other benefits, including sick leave, as the Company shall from time to time make available to its senior executive employees. Executive shall be subject to the Company’s personnel practices in effect from time to time, in accordance with the Company’s Executive Handbook; provided that in the event of any conflict between the Executive Handbook or any other policy of the Company and the terms of this Agreement, the terms of this Agreement shall govern and control.

(d)    The Company shall promptly reimburse Executive for all reasonable expenses incurred by Executive in the course of Executive’s employment under this Agreement, subject to such reasonable requirements with respect to substantiation and documentation as may be specified by the Company or the Internal Revenue Service. The Company may establish general guidelines with respect to expenses chargeable to the Company. Only expenses meeting the terms of such guidelines are subject to reimbursement unless the Company otherwise determines, at its discretion, on a case-by-case basis.

6.    Termination. Executive’s employment pursuant to this Agreement may be terminated upon the happening of any of the following events (each, a “Termination Event”), subject to Section 7 hereof:

(a)    The death of Executive;

(b)    The Company’s delivery to Executive of written notice of immediate termination by the Company of the services of Executive for Cause. As used in this Agreement, “Cause” shall be defined to include any one or more than one of the following:

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(1)    Material Breach of any term of this Agreement by Executive. As used in this Agreement, the term “Material Breach” shall be defined as any act, other than an act which falls within the scope of one or more of Sections 6(b)(2) through 6(b)(6) of this Agreement, which is a breach of a material term of this Agreement, which causes or is likely to cause material harm to the Company, and which, if correctable, is not corrected by Executive within thirty (30) days after written notice of such breach is provided to Executive by the Company;

(2)    Embezzlement, misappropriation or theft of money or material property by Executive from the Company;

(3)    Executive’s commission of, conviction of, or plea of no contest (or similar pleading) to, a felony or serious misdemeanor or other crime involving moral turpitude during the Term;

(4)    Executive’s fraud or material dishonesty to or with respect to the Company or conduct by Executive which would constitute a breach of the duty of loyalty by a director of the Company (whether Executive is then serving or has ever served as a director of the Company); or

(5)    Executive’s continued or repeated failure to perform in any material respect the duties assigned to Executive by the Board; provided, however, the Company will notify Executive in writing specifically identifying Executive’s failure to perform not less than thirty (30) days prior to any proposed termination and give Executive a reasonable opportunity to correct such failure.

(c)    Thirty (30) days after the Company’s delivery to Executive of written notice of termination by the Company of the services of Executive without Cause;

(d)    Thirty (30) days after the Company’s receipt from Executive of a written notice of resignation for Good Reason, which written notice must: (i) state in reasonable specificity the event giving rise to Good Reason, (ii) be provided to the Company no later than ninety (90) days following the initial occurrence constituting Good Reason, and (iii) provide the Company with thirty (30) days to correct or cure the event constituting Good Reason hereunder. As used in this Agreement, “Good Reason” shall be defined to include the occurrence, without Executive’s consent, of any one or more of the following:

(1)    The Company’s Material Breach of any term of this Agreement. As used in this Agreement, the term “Company’s Material Breach” shall be defined as any act, other than an act which falls within the scope of Sections 6(d)(2) and (3) of this Agreement, which breaches a material term of this Agreement, causes or is likely to cause material harm to Executive and is not corrected by the Company within the cure period provided for above;

(2)    Any material reduction in Executive’s Base Salary, target bonus percentage or benefits (but excluding any reduction in benefits proportionately applicable to all executives of the Company) or any material diminution in Executive’s title, duties or responsibility

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as President and Chief Executive Officer of the Company, in each case which is not corrected by the Company within the cure period provided for above; or

(3)    Any relocation of Executive’s primary work location by more than fifty (50) miles from the city of Palo Alto, which is not corrected by the Company within the cure period described in Section 6(d)(iii) above.

(e)    Thirty (30) days after the Company’s receipt from Executive of a written notice of resignation without Good Reason, which date may be accelerated by the Company by delivery of written notice to Executive stating the date upon which such termination of employment shall be effective (which acceleration of date shall in no event constitute a termination without Cause);

(f)    The mutual written agreement of both Executive and the Company.

7.    Benefits and Duties Upon Termination.

(a)    Termination by Company for Cause. Upon any termination of Executive’s employment hereunder for Cause, as defined above, Executive shall be entitled to no further compensation or benefits under this Agreement after the termination date, except (i) accrued but unpaid Base Salary through the date of termination, unpaid expense reimbursements (subject to, and in accordance with, Section 5(d) of this Agreement) and unused vacation that accrued through the date of termination on or before the time required by law but in no event more than thirty (30) days after the date of termination; (ii) any vested benefits Executive may have under any employee benefit plan of the Company through the date of termination, which vested benefits shall be paid and/or provided in accordance with the terms of such employee benefit plans and (iii) any other amounts as may be required by law (collectively, the “Accrued Benefit”).

(b)    Termination by Company Without Cause or by Executive with Good Reason. If Executive’s employment with the Company is terminated: (i) by the Company without Cause; or (ii) by Executive for Good Reason (each a “Severance Event”), provided that Executive executes a general release substantially in the form attached as Appendix A hereto and such release becomes effective no later than 60 days after the date of termination, the Company shall: (A) pay Executive the Accrued Benefit; (B) continue to pay Executive, in accordance with the Company’s regular periodic payroll practices in place immediately prior to such termination, an amount equal to Executive’s Base Salary for twelve (12) months from the effective date of Executive’s termination (the “Severance Term”); (C) pay Executive an amount equal to Executive’s Target Bonus multiplied by a fraction, the numerator of which is the number of days Executive was employed during the calendar year during which the date of termination occurs and the denominator of which is 365; and (D) pay an amount throughout the Severance Term equal to (x) Executive’s monthly cost of coverage with respect to health benefits immediately prior to the Termination Event, plus (y) the taxable life insurance coverage otherwise made available to Executive under this Agreement, with payment of such benefits to be made in any event no later than the end of the calendar year immediately following the calendar year in which Executive’s employment terminated. Amounts due under Section 7(b)(B) and (D)(x) shall commence within 60 days after the effectiveness of the release described above; provided that if the 60-day period for providing a general release spans

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two calendar years, payment shall commence to be made in the second calendar year with a catch-up payment for amounts that would have commenced earlier but for the operation of this sentence. Amounts due under this Section 7(b) shall be paid without mitigation or offset for any other amount earned by Executive. Upon termination of Executive’s employment as the result of a Severance Event, all of Executive’s stock options and other stock-based awards that are subject to time-based vesting and that would otherwise have vested during the twelve (12) month period following the effective date of such termination (assuming no termination had occurred) shall immediately accelerate and become fully exercisable or nonforfeitable as of the date of such termination.

(c)    Voluntary Resignation Without Good Reason. If Executive resigns voluntarily without Good Reason, Executive shall not be entitled to further compensation or benefits following the effective date of termination (except the Accrued Benefit); provided, however, that the Company may accelerate the effective date of any resignation by providing written notice to Executive of such accelerated effective date, provided that the Company pays and provides to Executive all Base Salary and benefits that would have been provided to Executive in the period between her resignation and her original effective date of resignation had she been employed by the Company during such period. Such resignation, by itself, will not give rise to a cause of action by the Company against Executive, and such acceleration of the effective date of any resignation will not give rise to a cause of action by Executive against the Company.

(d)    Mutual Agreement. Upon any termination of Executive’s employment hereunder through written mutual agreement, Executive shall be entitled to the Accrued Benefit and any further compensation or benefits as mutually agreed upon in writing.

(e)    Change of Control. If Executive’s employment is terminated: (i) by the Company for any reason other than for Cause, other than by reason of her death or permanent disability, or (ii) by Executive for Good Reason, in either case, in anticipation of and within three (3) months before, concurrently with, or within twelve (12) months following a Change of Control, and provided that Executive executes a general release substantially in the form attached as Appendix A hereto and such release becomes effective no later than 60 days after the date of termination, then all stock options and other stock-based awards held by Executive that are subject to time-based vesting shall vest and become exercisable in full as of a time immediately prior to such termination, or Change of Control, if later, and the Company shall pay Executive:

(i)    an amount equal to twelve (12) months of her then-current monthly base salary (less all applicable deductions for withholding taxes and the like) payable in a single lump sum;

(ii)    an amount equal to: (i) the percentage of her annual base salary Executive received as a bonus payment for the calendar year immediately preceding the year of termination, multiplied by (ii) the base salary Executive received in the year of termination (excluding payments made pursuant to Section 7(f)(i) hereof), such amount to be paid in a single lump sum; and

(iii)    an amount equal to Executive’s monthly cost of coverage for group health benefits immediately prior to the Termination Event, times twelve (12).

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Amounts due under this Section 7(e) are in lieu of amounts payable under Section 7(b) and shall be paid without mitigation or offset for any other amount earned by Executive. If all conditions necessary to establish Executive’s entitlement to the payments specified in this Section 7(e) have been satisfied, such payments shall be paid in full within five (5) business days after the effectiveness of the release described above, and in any event no later than March 15 of the calendar year following the calendar year in which Executive’s employment terminated. Notwithstanding the foregoing, if the 60-day period for providing a general release spans two calendar years, payment shall be made only in the second calendar year.

(f)    Definition of Change of Control. For purposes of this Agreement, a “Change of Control” shall be deemed to have occurred:

(i)    If any person (as such term is used in sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (other than the Company or any trustee or fiduciary holding securities under an employee benefit plan of the Company), becomes a beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the voting power of the then outstanding securities of the Company; provided that, a Change of Control shall not be deemed to occur as a result of a transaction in which the Company becomes a subsidiary of another corporation and in which the stockholders of the Company, immediately prior to the transaction, will beneficially own, immediately after the transaction, shares entitling such stockholders to more than 50% of all votes to which all stockholders of the parent corporation would be entitled in the election of directors (without consideration of the rights of any class of stock to elect directors by a separate class vote).

(ii)    Upon the consummation of (A) a merger or consolidation of the Company with another corporation where the stockholders of the Company, immediately prior to the merger or consolidation, will beneficially own, immediately after the merger or consolidation, shares entitling such stockholders to less than 50% of all votes to which all stockholders of the surviving corporation would be entitled in the election of directors (without consideration of the rights of any class of stock to elect directors by a separate class vote), (B) a sale or other disposition of all or substantially all of the assets of the Company, or (C) any merger, sale or disposition described in clauses (A) or (B) involving one or more subsidiaries of the Company whose collective operations constitute a majority of the Company’s business. For purposes of clarity, any change in the majority ownership of the Company that results solely from an equity financing event (i.e., an event pursuant to which existing stockholders are not transferring or selling existing shares), shall in no event constitute a Change of Control hereunder.

8.    Section 280G.

(a)    Notwithstanding anything to the contrary herein, if it shall be determined that any payment or benefit hereunder or under any other plan or agreement or otherwise, calculated in a manner consistent with Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and the applicable regulations thereunder (collectively “Payments”), would constitute a “ parachute payment” to Executive within the meaning of Section 280G of the Code, and thus would not be deductible under Section 280G of the Code and would be subject to the excise tax imposed by Section 4999 of the Code (“280G Tax”), and if and only if Executive would be in a better after-

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tax position by reducing the Payments, the Payments shall be reduced such that the sum of all Payments is $1.00 less than the amount at which Executive becomes subject to the excise tax imposed by Section 4999 of the Code. In such case, the Payments shall be reduced in the following order, in each case, in reverse chronological order beginning with the Payments that are to be paid the furthest in time from consummation of the transaction that is subject to Section 280G of the Code: (1) cash payments not subject to Section 409A of the Code; (2) cash payments subject to Section 409A of the Code; (3) equity-based payments and acceleration; and (4) non-cash forms of benefits; provided that in the case of all the foregoing aggregate Payments all amounts or payments that are not subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c) shall be reduced before any amounts that are subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c).

(b)    Any determinations to be made under this Section 8 shall be made by the Company’s independent public accountants (the “Accounting Firm”), which firm shall provide its determinations and any supporting calculations both to the Company and to Executive, and shall be binding upon the Company and Executive. All fees and expenses of the Accounting Firm in performing the determinations referred to in this Section shall be borne solely by the Company.

9.    Restrictive Covenants.

(a)    For a period of one (1) year following any Termination Event (the “Non-Solicitation Period”), Executive shall not directly or indirectly induce or attempt to influence any employee of the Company or any of its subsidiaries to terminate his or her employment with the Company or any such subsidiary, as the case may be.

(b)    During the term of this Agreement, Executive shall not, without the written consent of the Company, engage in, whether as a principal, partner, director, officer, agent, employee, consultant or in any other capacity, or have any direct or indirect ownership interest in, any business which has as its primary focus the development of pharmaceutical therapies in which the Company is conducting clinical trials during the term of Executive’s employment (the “Area of Non-Competition”) or with any division or group of a business which has the Area of Non-Competition as its primary business focus; provided, however, that this covenant not to compete shall not preclude an Executive from owning, as a passive investor, up to five percent (5%) of the outstanding shares in a publicly traded company engaged in the activities specified in this Section 9(b).

(c)    If the covenants set forth in this Section 9 shall be held by any court of competent jurisdiction to be excessively broad in time or geographical area or both, then they shall not be void, but shall be effective and enforceable for such shorter period of time and as to such more limited geographical area as shall be found by such court to be valid and enforceable.

10.    Trade Secrets and Confidential Information.

(a)    Definition. “Confidential Information” includes all materials, technical data, information, reports, presentation materials, interpretations, forecasts, test results and other records which (i) are not available to the general public, (ii) relating to the business activities, products and services of the Company and its subsidiaries, including their respective customers and suppliers, and (iii) are disclosed to Executive in connection with her services to the Company. The term

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“Confidential Information” shall specifically include, without limitation, all Company Innovations. “Confidential Information” also shall include those portions of any opinions, judgments or recommendations which contain or would reveal the Confidential Information, whether formulated or prepared by the Company or Executive.

(b)    Exceptions. The obligations regarding Confidential Information under this Agreement shall not apply to any information which:

(1)    is or becomes available to the general public without fault of Executive;

(2)    was previously known to Executive prior to disclosure to Executive by the Company, as evidenced by tangible records;

(3)    subsequently is rightfully obtained by Executive from a third party who lawfully possessed the information and who had the right to make such disclosures; or

(4)    is required to be disclosed to the public directly or be accessed by a freedom of information request as a result of an order of a court of law or other governmental body.

(c)    Use and Obligations. Executive shall use Confidential Information only to perform Executive’s duties and obligations to the Company, and shall not disclose or use Confidential Information for any other reason or purpose. Executive’s obligations under this Agreement apply to all Confidential Information, and Executive agrees to protect such information regardless of whether the information was disclosed in verbal, written, visual or other form. Executive hereby agrees to give notice immediately to the Company of any unauthorized use or disclosure of Confidential Information by Executive. Executive further agrees to assist the Company in remedying any such unauthorized use or disclosure of Confidential Information. Confidential Information shall not become the property of Executive, shall be kept confidential and shall be protected from disclosure by Executive exercising at least the same degree of care as used to protect her own proprietary information of like kind and nature; provided, however, that in no case shall the degree of care be less than a reasonable degree of care. Furthermore, no right is granted to Executive to make, use, or sell any invention or material described in the Confidential Information.

(d)    Procedure for Required Disclosure. In the event that Executive is requested or required to disclose to third parties any Confidential Information or any opinions, judgments or recommendations developed from the Confidential Information, Executive will, prior to disclosing such Confidential Information, and to the extent permitted by law, provide the Company with prompt notice of such request(s) or requirement(s) so that the Company may seek appropriate legal protection or waive compliance with the provisions of this Agreement. If no legal protection or waiver is obtained and, after consulting her legal counsel, Executive concludes that she is compelled by law to disclose certain Confidential Information, Executive may disclose that Confidential Information. Executive will not oppose action by, and will reasonably cooperate with the Company to obtain legal protection or other reliable assurance that confidential treatment will be accorded the Confidential Information.

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(e)    Return of Confidential Information. At the Company’s written request, Executive shall (a) promptly return all written Confidential Information and all other written material concerning or reflecting any information in the Confidential Information; and (b) not retain any copies, extracts or reproductions in whole or in part of such written material. Notwithstanding the foregoing, the parties acknowledge that Executive may retain her address book and contact list to the extent they only contain contact information.

(f)    Survival of Provisions. Executive recognizes and agrees that she is and shall continue to be bound by the provisions of this Section 10 upon expiration of the Term or upon the occurrence of a Termination Event for a period of three (3) years after the effective date of such termination or expiration.

11.    Intellectual Property.

(a)    Definitions. As used in this Agreement, the term “Innovations” shall mean (i) processes, machines and compositions of matter; (ii) inventions and improvements (whether or not protectable under patent laws); (iii) techniques, ideas, concepts and programs; (iv) works of authorship and information fixed in any tangible medium (whether or not protectable under copyright laws); (v) mask works; (vi) trademarks, trade names, trade dress and trade secrets and know-how (whether or not protectable under trade secret laws); and (vii) all other subject matter protectable under patent, copyright, mask work, trademark, trade secret or other similar laws. The term “Company Innovations” shall mean Innovations that Executive, solely or jointly with others, conceives, reduces to practice, creates, derives, develops or makes in the course of or otherwise in connection with Executive’s employment with the Company. The term “Company Innovations” shall also include, without limitation, any derivative works, improvements, renewals, extensions, continuations, divisionals, continuations in part, or continuing patent applications relating to any Company Innovation.

(b)    Intellectual Property Rights. Executive understands, acknowledges, and agrees that (i) all Company Innovations shall belong to the Company; and (ii) all Company Innovations which constitute works of authorship shall be works-made-for-hire as defined by and pursuant to the Copyright Act of 1976, as amended. Executive shall promptly disclose to the Company in writing any and all Innovations, conceived, reduced to practice, created, derived, developed or made in the course of or otherwise in connection with Executive’s employment with the Company, whether alone or with others, and whether during regular working hours or through the use of facilities and properties of the Company or otherwise which relate to the business of the Company. Executive agrees to make and maintain adequate and current records of all such Innovations, which shall be and remain the property of the Company. Executive further agrees to use her best efforts to supply Company Innovations to the Company in whatever form the Company may require. Executive hereby assigns and agrees to assign to the Company or such other party as the Company may designate all of Executive’s right, title, and interest (including but not limited to patent rights and copyrights) in and to any Company Innovations which are deemed not to be works-made-for-hire to the Company or such other party as the Company may designate, and at the Company’s request, Executive agrees to provide whatever assistance the Company (or such other party, as the case may be) may require to register, record, perfect, or otherwise secure the Company’s

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(or such other party’s, as the case may be) rights in such Company Innovations, in each case at the Company’s expense.

(c)    Termination Events. Upon Company’s written request, which shall be received by Executive no later than thirty (30) days after the occurrence of any Termination Event, Executive shall:

(1)    Deliver to the Company all designs, drawings, sketches, prototypes and other data and records relating to Company Innovations;

(2)    Relinquish all rights, title and interest in such Company Innovations to Company; and

(3)    Assign, execute and deliver all applications, assignments and any and all other documents necessary for the Company to apply for federal, state or foreign intellectual property protection on such Company Innovations.

(d)    Relinquishment of Rights to Royalties. Executive understands, acknowledges, and agrees that by signing this Agreement she relinquishes any and all rights to royalties or any portion of gross revenues in connection with any Innovations, including Company Innovations, owned or sold by the Company or its subsidiaries.

(e)    Relinquishment of Free Licenses. Executive understands, acknowledges, and agrees that by signing this Agreement, she relinquishes any and all rights to have personally a free nonexclusive license in any Innovation, including Company Innovations, owned, licensed, used or held by the Company or its affiliates.

(f)    Exceptions. Notwithstanding anything to the contrary in this Section 11, Executive shall be entitled to retain all of her rights and interest in and to any Innovation not related to an Area of Non-Competition, which she authors or creates as part of any project on her own time, not during normal business hours, and not using Confidential Information or Company resources or personnel, to and only to the fullest extent allowed by California Labor Code Section 2870 (which is attached as Appendix B).

12.    Succession and Assignment. This Agreement shall bind all parties, their respective heirs, executors, administrators, successors and assigns, but nothing contained herein shall be construed as an authorization or right of Executive to assign her rights or obligations hereunder.

13.    Waiver of Breach or Violation Not Continuing. Waiver of a breach or violation of any provision of this Agreement shall not operate or be construed to be a waiver if any subsequent breach hereof.

14.    Notices. The delivery of any statement or the giving of any notice provided for or required herein may be effected by (i) delivery by hand and the execution by the recipient of a written receipt, or (ii) by depositing with the United States Postal Service or in any one of its regular depositories the same to the recipient by registered or certified mail, postage prepaid, with return

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receipt requested, addressed as follows: in the case of Executive, to Executive’s last known residence, with a copy to (which shall not constitute notice) Foley Hoag LLP, 155 Seaport Blvd., Boston, MA 02210, attn.: Peter M. Rosenblum; or in the case of the Company, to its principal offices, or any subsequent address provided to Executive, to the attention of the Board, with copy to Mitchell S. Bloom, Goodwin Procter LLP, 53 State Street, Boston, MA, mbloom@goodwinprocter.com.

15.    Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts to be executed, and entirely to be performed, in such State, and in any event without giving effect to any choice or conflict of law provisions of such State.

16.    No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any person other than the parties hereto and their respective successors and permitted assigns.

17.    Headings. The headings contained in this Agreement are for convenience only and shall in no manner be construed as part of this Agreement.

18.    Gender. The use of the feminine gender shall include the masculine gender and the singular, the plural and vice versa.

19.    Entire Agreement. This Agreement constitutes the entire agreement between the parties and supersedes any prior understandings, agreements or representations by or between the parties, written or oral, to the extent they related in any way to the subject matter hereof. This Agreement may not be changed except by an agreement, in writing, executed by a duly authorized representative of the Company and Executive.

20.    Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If any term or provision of this Agreement is judicially determined to be invalid or unenforceable, then the parties agree that such provision shall automatically be modified to be enforceable to the fullest extent permitted by then applicable law.

21.    Indemnification. In addition to the indemnification provisions applicable to Executive under the Company’s certificate of incorporation and bylaws, the Company hereby agrees to indemnify, hold harmless and defend Executive, to the maximum extent allowable under Delaware law, from and against any and all claims, liabilities, losses, costs, expenses, causes of action and damages (including, without limitation, attorney fees and court costs, as incurred) arising out of or related in any manner to her employment. The Company shall use reasonable efforts to maintain during the Term, Directors and Officers liability insurance, in amounts and with deductibles customary for a comparably situated company and shall extend such coverage to include Executive, during the Term and for not less than six (6) years thereafter, for any matters relating to her employment with the Company.

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22.    Taxes. The Company may withhold from any payments made under this Agreement all applicable taxes, including but not limited to income, employment and social insurance taxes, as shall be required by law.

23.    Section 409A of the Code.

(a)    Anything in this Agreement to the contrary notwithstanding, if at the time of Executive’s separation from service within the meaning of Section 409A of the Code, the Company determines that Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that Executive becomes entitled to under this Agreement on account of Executive’s separation from service would be considered deferred compensation otherwise subject to the twenty (20) percent additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six (6) months and one day after Executive’s separation from service, or (B) Executive’s death. If any such delayed payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule.

(b)    All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred by Executive during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses). Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

(c)    To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon Executive’s termination of employment, then such payments or benefits shall be payable only upon Executive’s “separation from service.” The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A‑1(h).

(d)    The parties intend that this Agreement will be administered in accordance with Section 409A of the Code. To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code. Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A‑2(b)(2). The parties agree that this Agreement may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the

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Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.

(e)    The Company makes no representation or warranty and shall have no liability to Executive or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section.

24.    Survival. The provisions of this Agreement will survive the termination of Executive’s employment for any reason to the extent necessary to enable the parties to enforce their respective rights hereunder.

* * *

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and Executive has hereunto set Executive’s hand, effective as of the date first above written.

EXECUTIVE

 /s/ Linda Grais

Linda Grais, M.D.

OCERA THERAPEUTICS, INC.

By: /s/ Linda Grais

Linda Grais, M.D.

Chief Executive Officer

APPENDIX A

FORM OF GENERAL RELEASE

RELEASE OF CLAIMS

This Release of Claims (the “Release”) is entered into by Linda S. Grais, M.D. (the “Executive”) pursuant to the Agreement of Employment dated April 8, 2016, by and between Ocera Therapeutics, Inc., a Delaware corporation (the “Company”), and the Executive (the “Agreement”). This Release is the release of legal claims referenced in Section 7(b) or 7(e) of the Agreement. Terms with initial capitalization that are not otherwise defined in this Release have the meanings set forth in the Agreement.

1.Consideration. The Company shall provide the Executive with the payments and benefits described in either Section 7(b) or 7(e) of the Agreement, at the times provided therein.

2.Release of Claims. The Executive voluntarily releases and forever discharges the Company and its predecessors, successors, assigns, and current and former members, equity holders. partners, directors, officers, employees, representatives, attorneys, agents, subsidiaries and all persons acting by, through, under or in concert with any of the foregoing (any and all of whom or which are hereinafter referred to as the “Releasees”), from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses (including attorney’s fees and costs actually incurred), of any nature whatsoever, known or unknown (collectively, “Claims”) that the Executive now has, owns or holds, or claims to have, own, or hold, or that she at any time had, owned, or held, or claimed to have had, owned, or held against any Releasee. This general release of Claims includes, without implication of limitation, the release of all Claims:

• relating to the Executive’s employment by and retirement from employment with the Company;

• of wrongful discharge;

• of breach of contract;

• of retaliation or discrimination under federal, state or local law (including, without limitation, Claims of age discrimination or retaliation under the Age Discrimination in Employment Act, Claims of disability discrimination or retaliation under the Americans with Disabilities Act, and Claims of discrimination or retaliation under Title VII of the Civil Rights Act of 1964;

• under any other federal or state statute, to the fullest extent that Claims may be released;

• of defamation or other torts;

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• of violation of public policy; and

• for damages or other remedies of any sort, including, without limitation, compensatory damages, punitive damages, injunctive relief and attorney’s fees.

• In granting the release herein, Executive understands that this Agreement includes a release of all claims known or unknown. In giving this release, which includes claims which may be unknown to Executive at present, Executive acknowledges that she has read and understands Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” Executive hereby expressly waives and relinquishes all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to the release of any unknown or unsuspected claims Executive may have against the Company or any Releasee.

3.Limitations on Release. Notwithstanding anything in Section 2 of this Release to the contrary, nothing in this Release limits the Executive’s rights to (i) any salary, bonus, vacation pay or any other compensation or benefits or reimbursement of expenses earned or accrued prior to the date hereof, (ii) indemnification by the Company that the Executive may have pursuant to any contract, the organizational documents of the Company and its subsidiaries or pursuant to applicable law or (iii) pursue a claim against the Company in the event that it breaches any of its obligations under the Agreement.

4.No Assignment. The Executive represents that she has not assigned to any other person or entity any Claims against any Releasee.

5.Right to Consider and Revoke Release. The Executive acknowledges that she has been given the opportunity to consider this Release for a period of twenty-one (21) days after the Executive receives this Release. In the event the Executive executed this Release within less than twenty-one (21) days, she acknowledges that such decision was entirely voluntary and that she had the opportunity to consider this Release until the end of the twenty-one (21) day period. To accept this Release, the Executive shall deliver a signed Release to the Companywithin such twenty-one (21) day period. For a period of seven (7) days from the date when the Executive executes this Release (the “Revocation Period”), she shall retain the right to revoke this Release by written notice that is received by the Company on or before the last day of the Revocation Period. This Release shall take effect only if it is executed within the twenty-one (21) day period as set forth above and if it is not revoked pursuant to the preceding sentence. If those conditions are satisfied, this Release shall become effective and enforceable on the date immediately following the last day of the Revocation Period (the “Effective Date”).

6.Other Terms.

(a)Legal Representation; Review of Release. The Executive acknowledges that she has been advised to discuss all aspects of this Release with his attorney, that she has

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carefully read and fully understands all of the provisions of this Release and that she is voluntarily entering into this Release.

(b)Binding Nature of Release. This Release shall be binding upon the Executive and upon her heirs, administrators, representatives and executors

(c)Amendment. This Release may be amended only upon a written agreement executed by the Executive and the Company.

(d)Severability. In the event that at any future time it is determined by an arbitrator or court of competent jurisdiction that any covenant, clause, provision or term of this Release is illegal, invalid or unenforceable, the remaining provisions and terms of this Release shall not be affected thereby and the illegal, invalid or unenforceable term or provision shall be severed from the remainder of this Release. In the event of such severance, the remaining covenants shall be binding and enforceable.

(e)Governing Law and Interpretation. This Release shall be deemed to be made and entered into in the state of California, and shall in all respects be interpreted, enforced and governed under the laws of California, without giving effect to the conflict of laws provisions of California law. The language of all parts of this Release shall in all cases be construed as a whole, according to its fair meaning, and not strictly for or against either the Company or the Executive.

(f)Entire Agreement; Absence of Reliance. The Executive acknowledges that she is not relying on any promises or representations by the Company or any of its agents, representatives or attorneys regarding any subject matter addressed in this Release.

So agreed by the Executive.

/s/ Linda Grais	April 08, 2016
Linda Grais, M.D.	Date

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APPENDIX B

California Labor Code Section 2870. Application of provision providing that employee shall assign or offer to assign rights in invention to employer.

(a)    Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

(1)    Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

(2)    Result from any work performed by the employee for his employer.

(b)    To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

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EX-10.2

Exhibit 10.2

AMENDED AND RESTATED AGREEMENT OF EMPLOYMENT

THIS AMENDED AND RESTATED AGREEMENT OF EMPLOYMENT (the “Agreement”) is made as of the 8^th day of April, 2016 (the “Effective Date”), by and between Gaurav Aggarwal, M.D. (hereinafter referred to as “Executive”), and Ocera Therapeutics, Inc., a corporation organized and existing under the laws of the State of Delaware (hereinafter referred to as the “Company”).

WITNESSETH:

WHEREAS, the Company and Executive previously entered in an employment agreement, dated April 30, 2014, which the Company and Executive intend to replace with this Agreement; and

WHEREAS, Executive acknowledges that the restrictions against disclosures of certain information, the provisions regarding ownership of intellectual property and the other agreements set forth in this Agreement have constituted a substantial inducement to the Company to enter into this Agreement, and that none of such restrictions or agreements set forth in the Agreement will be unduly burdensome.

NOW, THEREFORE, in consideration of the premises set forth above and the mutual covenants and agreements contained herein, the parties hereby agree as follows:

1.    Employment. The Company hereby continues to employ Executive as its Chief Business Officer, and Executive hereby accepts such continued employment upon the terms and conditions set forth in this Agreement.

2.    Term of Employment. The Company will continue to employ Executive, and Executive agrees to continue to remain in the full-time employ of the Company, until such employment is terminated by either party in accordance with the provisions hereof (the “Term”).

3. Duties and Authority of Executive.

(a)    Executive shall devote his full business time, attention and energies to performance of his duties hereunder as reasonably directed by the Company’s Chief Executive Officer, and further agrees at all such times to act in a manner consistent with Company interests, and to perform such duties ably, faithfully and diligently. Executive shall be permitted to engage in family, civic, charitable and other non-commercially oriented activities but shall not engage in any outside work during business hours and/or commercially oriented activities which will materially affect, impede, prohibit, or restrict his abilities to perform his obligations under this Agreement. Executive shall provide written notice to the Company’s Chief Executive Officer prior to engaging in any material outside work or commercially oriented activity, and permission to engage in any such work or activity shall be granted solely in the discretion of the Chief Executive Officer. Executive shall have the ability to engage in activities which are primarily personal investment activities and are not related to the business of the Company, provided, further, no such activity shall interfere, in any material respect, with Executive’s obligations under this Agreement.

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Notwithstanding the foregoing, and except to the extent the restrictions contained in Section 9 may apply, nothing in this Agreement shall prohibit Executive from: (i) participating in charitable and professional organizations in an unpaid capacity; or (ii) serving as a non-executive director of one or more other corporations so long as such activities are disclosed to the Chief Executive Officer; in each case, in a manner, and to an extent, that will not materially interfere with his duties to the Company.

(b)    Executive shall report directly to the Company’s Chief Executive Officer. The Chief Executive Officer shall have the power to direct, control and supervise the duties of Executive under this Agreement, as well as the manner of Executive’s performance of such duties; provided, however, that such duties are consistent with Executive’s position or other positions that he may hold from time to time and the Chief Executive Officer shall not impose or permit to be imposed on its behalf any duties or constraints of any kind that would require Executive to violate any law or applicable government rule or regulation.

4. Compensation.

(a)    Salary. As Executive’s base salary for all services rendered to the Company during the term of this Agreement, in whatever capacity rendered, Executive shall receive an initial annual base salary of Three hundred and Sixty Thousand Dollars ($360,000), payable in accordance with the Company’s usual payroll practices for senior executives. Executive’s Base Salary, as in effect from time to time, shall not be decreased without Executive’s prior written consent. The base salary in effect at any given time is referred to herein as “Base Salary”. The Company hereby agrees the Board of Directors of the Company (the “Board”) or the Compensation Committee of the Board (the “Compensation Committee”) shall conduct an annual review of Executive’s Base Salary and will consider whether an increase in salary is appropriate, based upon Executive’s performance and Company performance.

(b)    Bonus. Executive shall be eligible to receive an annual bonus with a target amount equal to forty percent (40%) of his annual Base Salary, with the actual amount determined by the Board or the Compensation Committee based upon the achievement of certain Executive performance goals and Company milestones identified by the Company after consultation with Executive. The annual target bonus in effect at any given time is referred to herein as the “Target Bonus.” Except as otherwise provided herein, to earn an annual bonus, Executive must be employed by the Company on the day such annual bonus is paid.

5.    Benefits.

(a)    Executive shall be eligible to participate in all benefits made available to any employees of the Company including, without limitation, medical insurance (covering Executive and his dependents), vacation and/or retirement plans, and such benefits shall be provided in accordance with the Company’s personnel policies in effect from time to time during the Term. The Company reserves the right to change any Company benefit plan without Executive’s consent at any time.

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(b)    Executive shall be eligible to participate in the Company’s 401(k) plan, subject to its terms and conditions.

(c)    Executive shall be entitled to four (4) weeks annual vacation leave, subject to the Company’s vacation policy in effect from time to time, no fewer than six (6) paid holidays per year and such other benefits, including sick leave, as the Company shall from time to time make available to its senior executive employees. Executive shall be subject to the Company’s personnel practices in effect from time to time, in accordance with the Company’s Executive Handbook; provided that in the event of any conflict between the Executive Handbook or any other policy of the Company and the terms of this Agreement, the terms of this Agreement shall govern and control.

(d)    The Company shall promptly reimburse Executive for all reasonable expenses incurred by Executive in the course of Executive’s employment under this Agreement, subject to such reasonable requirements with respect to substantiation and documentation as may be specified by the Company or the Internal Revenue Service. The Company may establish general guidelines with respect to expenses chargeable to the Company. Only expenses meeting the terms of such guidelines are subject to reimbursement unless the Company otherwise determines, at its discretion, on a case-by-case basis.

6.    Termination. Executive’s employment pursuant to this Agreement may be terminated upon the happening of any of the following events (each, a “Termination Event”), subject to Section 7 hereof:

(a)    The death of Executive;

(b)    The Company’s delivery to Executive of written notice of immediate termination by the Company of the services of Executive for Cause. As used in this Agreement, “Cause” shall be defined to include any one or more than one of the following:

(1)    Material Breach of any term of this Agreement by Executive. As used in this Agreement, the term “Material Breach” shall be defined as any act, other than an act which falls within the scope of one or more of Sections 6(b)(2) through 6(b)(6) of this Agreement, which is a breach of a material term of this Agreement, which causes or is likely to cause material harm to the Company, and which, if correctable, is not corrected by Executive within thirty (30) days after written notice of such breach is provided to Executive by the Company;

(2)    Embezzlement, misappropriation or theft of money or material property by Executive from the Company;

(3)    Executive’s commission of, conviction of, or plea of no contest (or similar pleading) to, a felony or serious misdemeanor or other crime involving moral turpitude during the Term;

(4)    Executive’s fraud or material dishonesty to or with respect to the Company or conduct by Executive which would constitute a breach of the duty of loyalty by a

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director of the Company (whether Executive is then serving or has ever served as a director of the Company); or

(5)    Executive’s continued or repeated failure to perform in any material respect the duties assigned to Executive by the Board or the Chief Executive Officer; provided, however, the Company will notify Executive in writing specifically identifying Executive’s failure to perform not less than thirty (30) days prior to any proposed termination and give Executive a reasonable opportunity to correct such failure.

(c)    Thirty (30) days after the Company’s delivery to Executive of written notice of termination by the Company of the services of Executive without Cause;

(d)    Thirty (30) days after the Company’s receipt from Executive of a written notice of resignation for Good Reason, which written notice must: (i) state in reasonable specificity the event giving rise to Good Reason, (ii) be provided to the Company no later than ninety (90) days following the initial occurrence constituting Good Reason, and (iii) provide the Company with thirty (30) days to correct or cure the event constituting Good Reason hereunder. As used in this Agreement, “Good Reason” shall be defined to include the occurrence, without Executive’s consent, of any one or more of the following:

(1)    The Company’s Material Breach of any term of this Agreement. As used in this Agreement, the term “Company’s Material Breach” shall be defined as any act, other than an act which falls within the scope of Sections 6(d)(2) and (3) of this Agreement, which breaches a material term of this Agreement, causes or is likely to cause material harm to Executive and is not corrected by the Company within the cure period provided for above;

(2)    Any material reduction in Executive’s Base Salary, target bonus percentage or benefits (but excluding any reduction in benefits proportionately applicable to all executives of the Company) or any material diminution in Executive’s title, duties or responsibility as Chief Business Officer of the Company, in each case which is not corrected by the Company within the cure period provided for above; or

(3)    Any relocation of Executive’s primary work location by more than fifty (50) miles from the city of Palo Alto, which is not corrected by the Company within the cure period described in Section 6(d)(iii) above.

(e)    Thirty (30) days after the Company’s receipt from Executive of a written notice of resignation without Good Reason, which date may be accelerated by the Company by delivery of written notice to Executive stating the date upon which such termination of employment shall be effective (which acceleration of date shall in no event constitute a termination without Cause);

(f)    The mutual written agreement of both Executive and the Company.

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7.    Benefits and Duties Upon Termination.

(a)    Termination by Company for Cause. Upon any termination of Executive’s employment hereunder for Cause, as defined above, Executive shall be entitled to no further compensation or benefits under this Agreement after the termination date, except (i) accrued but unpaid Base Salary through the date of termination, unpaid expense reimbursements (subject to, and in accordance with, Section 5(d) of this Agreement) and unused vacation that accrued through the date of termination on or before the time required by law but in no event more than thirty (30) days after the date of termination; (ii) any vested benefits Executive may have under any employee benefit plan of the Company through the date of termination, which vested benefits shall be paid and/or provided in accordance with the terms of such employee benefit plans and (iii) any other amounts as may be required by law (collectively, the “Accrued Benefit”).

(b)    Termination by Company Without Cause or by Executive with Good Reason. If Executive’s employment with the Company is terminated: (i) by the Company without Cause; or (ii) by Executive for Good Reason (each a “Severance Event”), provided that Executive executes a general release substantially in the form attached as Appendix A hereto and such release becomes effective no later than 60 days after the date of termination, the Company shall: (A) pay Executive the Accrued Benefit; (B) continue to pay Executive, in accordance with the Company’s regular periodic payroll practices in place immediately prior to such termination, an amount equal to Executive’s Base Salary for six (6) months from the effective date of Executive’s termination (the “Severance Term”); (C) pay Executive an amount equal to Executive’s Target Bonus multiplied by a fraction, the numerator of which is the number of days Executive was employed during the calendar year during which the date of termination occurs and the denominator of which is 365; and (D) pay an amount throughout the Severance Term equal to Executive’s monthly cost of coverage with respect to health benefits immediately prior to the Termination Event, with payment of such benefits to be made in any event no later than the end of the calendar year immediately following the calendar year in which Executive’s employment terminated. Amounts due under Section 7(b)(B) and (D) shall commence within 60 days after the effectiveness of the release described above; provided that if the 60-day period for providing a general release spans two calendar years, payment shall commence to be made in the second calendar year with a catch-up payment for amounts that would have commenced earlier but for the operation of this sentence. Amounts due under this Section 7(b) shall be paid without mitigation or offset for any other amount earned by Executive. Upon termination of Executive’s employment as the result of a Severance Event, all of Executive’s stock options and other stock-based awards that are subject to time-based vesting and that would otherwise have vested during the six (6) month period following the effective date of such termination (assuming no termination had occurred) shall immediately accelerate and become fully exercisable or nonforfeitable as of the date of such termination.

(c)    Voluntary Resignation Without Good Reason. If Executive resigns voluntarily without Good Reason, Executive shall not be entitled to further compensation or benefits following the effective date of termination (except the Accrued Benefit); provided, however, that the Company may accelerate the effective date of any resignation by providing written notice to Executive of such accelerated effective date, provided that the Company pays and provides to Executive all Base Salary and benefits that would have been provided to Executive in the period

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between his resignation and his original effective date of resignation had he been employed by the Company during such period. Such resignation, by itself, will not give rise to a cause of action by the Company against Executive, and such acceleration of the effective date of any resignation will not give rise to a cause of action by Executive against the Company.

(d)    Mutual Agreement. Upon any termination of Executive’s employment hereunder through written mutual agreement, Executive shall be entitled to the Accrued Benefit and any further compensation or benefits as mutually agreed upon in writing.

(e)    Change of Control. If Executive’s employment is terminated: (i) by the Company for any reason other than for Cause, other than by reason of his death or permanent disability, or (ii) by Executive for Good Reason, in either case, in anticipation of and within three (3) months before, concurrently with, or within twelve (12) months following a Change of Control, and provided that Executive executes a general release substantially in the form attached as Appendix A hereto and such release becomes effective no later than 60 days after the date of termination, then all stock options and other stock-based awards held by Executive that are subject to time-based vesting shall vest and become exercisable in full as of a time immediately prior to such termination, or Change of Control, if later, and the Company shall pay Executive:

(i)    an amount equal to six (6) months of his then-current monthly base salary (less all applicable deductions for withholding taxes and the like) payable in a single lump sum;

(ii)    an amount equal to: (i) the percentage of his annual base salary Executive received as a bonus payment for the calendar year immediately preceding the year of termination, multiplied by (ii) the base salary Executive received in the year of termination (excluding payments made pursuant to Section 7(f)(i) hereof), such amount to be paid in a single lump sum; and

(iii)    an amount equal to Executive’s monthly cost of coverage for group health benefits immediately prior to the Termination Event, times six (6).

Amounts due under this Section 7(e) are in lieu of amounts payable under Section 7(b) and shall be paid without mitigation or offset for any other amount earned by Executive. If all conditions necessary to establish Executive’s entitlement to the payments specified in this Section 7(e) have been satisfied, such payments shall be paid in full within five (5) business days after the effectiveness of the release described above, and in any event no later than March 15 of the calendar year following the calendar year in which Executive’s employment terminated. Notwithstanding the foregoing, if the 60-day period for providing a general release spans two calendar years, payment shall be made only in the second calendar year.

(f)    Definition of Change of Control. For purposes of this Agreement, a “Change of Control” shall be deemed to have occurred:

(i)    If any person (as such term is used in sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (other than the Company or

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any trustee or fiduciary holding securities under an employee benefit plan of the Company), becomes a beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the voting power of the then outstanding securities of the Company; provided that, a Change of Control shall not be deemed to occur as a result of a transaction in which the Company becomes a subsidiary of another corporation and in which the stockholders of the Company, immediately prior to the transaction, will beneficially own, immediately after the transaction, shares entitling such stockholders to more than 50% of all votes to which all stockholders of the parent corporation would be entitled in the election of directors (without consideration of the rights of any class of stock to elect directors by a separate class vote).

(ii)    Upon the consummation of (A) a merger or consolidation of the Company with another corporation where the stockholders of the Company, immediately prior to the merger or consolidation, will beneficially own, immediately after the merger or consolidation, shares entitling such stockholders to less than 50% of all votes to which all stockholders of the surviving corporation would be entitled in the election of directors (without consideration of the rights of any class of stock to elect directors by a separate class vote), (B) a sale or other disposition of all or substantially all of the assets of the Company, or (C) any merger, sale or disposition described in clauses (A) or (B) involving one or more subsidiaries of the Company whose collective operations constitute a majority of the Company’s business. For purposes of clarity, any change in the majority ownership of the Company that results solely from an equity financing event (i.e., an event pursuant to which existing stockholders are not transferring or selling existing shares), shall in no event constitute a Change of Control hereunder.

8.    Section 280G.

(a)    Notwithstanding anything to the contrary herein, if it shall be determined that any payment or benefit hereunder or under any other plan or agreement or otherwise, calculated in a manner consistent with Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and the applicable regulations thereunder (collectively “Payments”), would constitute a “ parachute payment” to Executive within the meaning of Section 280G of the Code, and thus would not be deductible under Section 280G of the Code and would be subject to the excise tax imposed by Section 4999 of the Code (“280G Tax”), and if and only if Executive would be in a better after-tax position by reducing the Payments, the Payments shall be reduced such that the sum of all Payments is $1.00 less than the amount at which Executive becomes subject to the excise tax imposed by Section 4999 of the Code. In such case, the Payments shall be reduced in the following order, in each case, in reverse chronological order beginning with the Payments that are to be paid the furthest in time from consummation of the transaction that is subject to Section 280G of the Code: (1) cash payments not subject to Section 409A of the Code; (2) cash payments subject to Section 409A of the Code; (3) equity-based payments and acceleration; and (4) non-cash forms of benefits; provided that in the case of all the foregoing aggregate Payments all amounts or payments that are not subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c) shall be reduced before any amounts that are subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c).

(b)    Any determinations to be made under this Section 8 shall be made by the Company’s independent public accountants (the “Accounting Firm”), which firm shall provide its

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determinations and any supporting calculations both to the Company and to Executive, and shall be binding upon the Company and Executive. All fees and expenses of the Accounting Firm in performing the determinations referred to in this Section shall be borne solely by the Company.

9.    Restrictive Covenants.

(a)    For a period of one (1) year following any Termination Event (the “Non-Solicitation Period”), Executive shall not directly or indirectly induce or attempt to influence any employee of the Company or any of its subsidiaries to terminate his employment with the Company or any such subsidiary, as the case may be.

(b)    During the term of this Agreement, Executive shall not, without the written consent of the Company, engage in, whether as a principal, partner, director, officer, agent, employee, consultant or in any other capacity, or have any direct or indirect ownership interest in, any business which has as its primary focus the development of pharmaceutical therapies in which the Company is conducting clinical trials during the term of Executive’s employment (the “Area of Non-Competition”) or with any division or group of a business which has the Area of Non-Competition as its primary business focus; provided, however, that this covenant not to compete shall not preclude an Executive from owning, as a passive investor, up to five percent (5%) of the outstanding shares in a publicly traded company engaged in the activities specified in this Section 9(b).

(c)    If the covenants set forth in this Section 9 shall be held by any court of competent jurisdiction to be excessively broad in time or geographical area or both, then they shall not be void, but shall be effective and enforceable for such shorter period of time and as to such more limited geographical area as shall be found by such court to be valid and enforceable.

10.    Trade Secrets and Confidential Information.

(a)    Definition. “Confidential Information” includes all materials, technical data, information, reports, presentation materials, interpretations, forecasts, test results and other records which (i) are not available to the general public, (ii) relating to the business activities, products and services of the Company and its subsidiaries, including their respective customers and suppliers, and (iii) are disclosed to Executive in connection with his services to the Company. The term “Confidential Information” shall specifically include, without limitation, all Company Innovations. “Confidential Information” also shall include those portions of any opinions, judgments or recommendations which contain or would reveal the Confidential Information, whether formulated or prepared by the Company or Executive.

(b)    Exceptions. The obligations regarding Confidential Information under this Agreement shall not apply to any information which:

(1)    is or becomes available to the general public without fault of Executive;

(2)    was previously known to Executive prior to disclosure to Executive by the Company, as evidenced by tangible records;

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(3)    subsequently is rightfully obtained by Executive from a third party who lawfully possessed the information and who had the right to make such disclosures; or

(4)    is required to be disclosed to the public directly or be accessed by a freedom of information request as a result of an order of a court of law or other governmental body.

(c)    Use and Obligations. Executive shall use Confidential Information only to perform Executive’s duties and obligations to the Company, and shall not disclose or use Confidential Information for any other reason or purpose. Executive’s obligations under this Agreement apply to all Confidential Information, and Executive agrees to protect such information regardless of whether the information was disclosed in verbal, written, visual or other form. Executive hereby agrees to give notice immediately to the Company of any unauthorized use or disclosure of Confidential Information by Executive. Executive further agrees to assist the Company in remedying any such unauthorized use or disclosure of Confidential Information. Confidential Information shall not become the property of Executive, shall be kept confidential and shall be protected from disclosure by Executive exercising at least the same degree of care as used to protect his own proprietary information of like kind and nature; provided, however, that in no case shall the degree of care be less than a reasonable degree of care. Furthermore, no right is granted to Executive to make, use, or sell any invention or material described in the Confidential Information.

(d)    Procedure for Required Disclosure. In the event that Executive is requested or required to disclose to third parties any Confidential Information or any opinions, judgments or recommendations developed from the Confidential Information, Executive will, prior to disclosing such Confidential Information, and to the extent permitted by law, provide the Company with prompt notice of such request(s) or requirement(s) so that the Company may seek appropriate legal protection or waive compliance with the provisions of this Agreement. If no legal protection or waiver is obtained and, after consulting his legal counsel, Executive concludes that he is compelled by law to disclose certain Confidential Information, Executive may disclose that Confidential Information. Executive will not oppose action by, and will reasonably cooperate with the Company to obtain legal protection or other reliable assurance that confidential treatment will be accorded the Confidential Information.

(e)    Return of Confidential Information. At the Company’s written request, Executive shall (a) promptly return all written Confidential Information and all other written material concerning or reflecting any information in the Confidential Information; and (b) not retain any copies, extracts or reproductions in whole or in part of such written material. Notwithstanding the foregoing, the parties acknowledge that Executive may retain his address book and contact list to the extent they only contain contact information.

(f)    Survival of Provisions. Executive recognizes and agrees that he is and shall continue to be bound by the provisions of this Section 10 upon expiration of the Term or upon the occurrence of a Termination Event for a period of three (3) years after the effective date of such termination or expiration.

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11.    Intellectual Property.

(a)    Definitions. As used in this Agreement, the term “Innovations” shall mean (i) processes, machines and compositions of matter; (ii) inventions and improvements (whether or not protectable under patent laws); (iii) techniques, ideas, concepts and programs; (iv) works of authorship and information fixed in any tangible medium (whether or not protectable under copyright laws); (v) mask works; (vi) trademarks, trade names, trade dress and trade secrets and know-how (whether or not protectable under trade secret laws); and (vii) all other subject matter protectable under patent, copyright, mask work, trademark, trade secret or other similar laws. The term “Company Innovations” shall mean Innovations that Executive, solely or jointly with others, conceives, reduces to practice, creates, derives, develops or makes in the course of or otherwise in connection with Executive’s employment with the Company. The term “Company Innovations” shall also include, without limitation, any derivative works, improvements, renewals, extensions, continuations, divisionals, continuations in part, or continuing patent applications relating to any Company Innovation.

(b)    Intellectual Property Rights. Executive understands, acknowledges, and agrees that (i) all Company Innovations shall belong to the Company; and (ii) all Company Innovations which constitute works of authorship shall be works-made-for-hire as defined by and pursuant to the Copyright Act of 1976, as amended. Executive shall promptly disclose to the Company in writing any and all Innovations, conceived, reduced to practice, created, derived, developed or made in the course of or otherwise in connection with Executive’s employment with the Company, whether alone or with others, and whether during regular working hours or through the use of facilities and properties of the Company or otherwise which relate to the business of the Company. Executive agrees to make and maintain adequate and current records of all such Innovations, which shall be and remain the property of the Company. Executive further agrees to use his best efforts to supply Company Innovations to the Company in whatever form the Company may require. Executive hereby assigns and agrees to assign to the Company or such other party as the Company may designate all of Executive’s right, title, and interest (including but not limited to patent rights and copyrights) in and to any Company Innovations which are deemed not to be works-made-for-hire to the Company or such other party as the Company may designate, and at the Company’s request, Executive agrees to provide whatever assistance the Company (or such other party, as the case may be) may require to register, record, perfect, or otherwise secure the Company’s (or such other party’s, as the case may be) rights in such Company Innovations, in each case at the Company’s expense.

(c)    Termination Events. Upon Company’s written request, which shall be received by Executive no later than thirty (30) days after the occurrence of any Termination Event, Executive shall:

(1)    Deliver to the Company all designs, drawings, sketches, prototypes and other data and records relating to Company Innovations;

(2)    Relinquish all rights, title and interest in such Company Innovations to Company; and

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(3)    Assign, execute and deliver all applications, assignments and any and all other documents necessary for the Company to apply for federal, state or foreign intellectual property protection on such Company Innovations.

(d)    Relinquishment of Rights to Royalties. Executive understands, acknowledges, and agrees that by signing this Agreement he relinquishes any and all rights to royalties or any portion of gross revenues in connection with any Innovations, including Company Innovations, owned or sold by the Company or its subsidiaries.

(e)    Relinquishment of Free Licenses. Executive understands, acknowledges, and agrees that by signing this Agreement, he relinquishes any and all rights to have personally a free nonexclusive license in any Innovation, including Company Innovations, owned, licensed, used or held by the Company or its affiliates.

(f)    Exceptions. Notwithstanding anything to the contrary in this Section 11, Executive shall be entitled to retain all of his rights and interest in and to any Innovation not related to an Area of Non-Competition, which he authors or creates as part of any project on his own time, not during normal business hours, and not using Confidential Information or Company resources or personnel, to and only to the fullest extent allowed by California Labor Code Section 2870 (which is attached as Appendix B).

12.    Succession and Assignment. This Agreement shall bind all parties, their respective heirs, executors, administrators, successors and assigns, but nothing contained herein shall be construed as an authorization or right of Executive to assign his rights or obligations hereunder.

13.    Waiver of Breach or Violation Not Continuing. Waiver of a breach or violation of any provision of this Agreement shall not operate or be construed to be a waiver if any subsequent breach hereof.

14.    Notices. The delivery of any statement or the giving of any notice provided for or required herein may be effected by (i) delivery by hand and the execution by the recipient of a written receipt, or (ii) by depositing with the United States Postal Service or in any one of its regular depositories the same to the recipient by registered or certified mail, postage prepaid, with return receipt requested, addressed as follows: in the case of Executive, to Executive’s last known residence; or in the case of the Company, to its principal offices, or any subsequent address provided to Executive, to the attention of the Chief Executive Officer, with copy to Mitchell S. Bloom, Goodwin Procter LLP, 53 State Street, Boston, MA, mbloom@goodwinprocter.com.

15.    Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts to be executed, and entirely to be performed, in such State, and in any event without giving effect to any choice or conflict of law provisions of such State.

16.    No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any person other than the parties hereto and their respective successors and permitted assigns.

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17.    Headings. The headings contained in this Agreement are for convenience only and shall in no manner be construed as part of this Agreement.

18.    Gender. The use of the feminine gender shall include the masculine gender and the singular, the plural and vice versa.

19.    Entire Agreement. This Agreement constitutes the entire agreement between the parties and supersedes any prior understandings, agreements or representations by or between the parties, written or oral, to the extent they related in any way to the subject matter hereof. This Agreement may not be changed except by an agreement, in writing, executed by a duly authorized representative of the Company and Executive.

20.    Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If any term or provision of this Agreement is judicially determined to be invalid or unenforceable, then the parties agree that such provision shall automatically be modified to be enforceable to the fullest extent permitted by then applicable law.

21.    Indemnification. In addition to the indemnification provisions applicable to Executive under the Company’s certificate of incorporation and bylaws, the Company hereby agrees to indemnify, hold harmless and defend Executive, to the maximum extent allowable under Delaware law, from and against any and all claims, liabilities, losses, costs, expenses, causes of action and damages (including, without limitation, attorney fees and court costs, as incurred) arising out of or related in any manner to his employment. The Company shall use reasonable efforts to maintain during the Term, Directors and Officers liability insurance, in amounts and with deductibles customary for a comparably situated company and shall extend such coverage to include Executive, during the Term and for not less than six (6) years thereafter, for any matters relating to his employment with the Company.

22.    Taxes. The Company may withhold from any payments made under this Agreement all applicable taxes, including but not limited to income, employment and social insurance taxes, as shall be required by law.

23.    Section 409A of the Code.

(a)    Anything in this Agreement to the contrary notwithstanding, if at the time of Executive’s separation from service within the meaning of Section 409A of the Code, the Company determines that Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that Executive becomes entitled to under this Agreement on account of Executive’s separation from service would be considered deferred compensation otherwise subject to the twenty (20) percent additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six (6) months and one day after Executive’s separation from service, or (B) Executive’s death. If any such delayed payment is otherwise

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payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule.

(b)    All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred by Executive during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses). Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

(c)    To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon Executive’s termination of employment, then such payments or benefits shall be payable only upon Executive’s “separation from service.” The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A‑1(h).

(d)    The parties intend that this Agreement will be administered in accordance with Section 409A of the Code. To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code. Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A‑2(b)(2). The parties agree that this Agreement may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.

(e)    The Company makes no representation or warranty and shall have no liability to Executive or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section.

24.    Survival. The provisions of this Agreement will survive the termination of Executive’s employment for any reason to the extent necessary to enable the parties to enforce their respective rights hereunder.

* * *

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and Executive has hereunto set Executive’s hand, effective as of the date first above written.

EXECUTIVE

 /s/ Gaurav Aggarwal

Gaurav Aggarwal, M.D.

OCERA THERAPEUTICS, INC.

By: /s/ Linda Grais

Linda Grais, M.D.

Chief Executive Officer

APPENDIX A

FORM OF GENERAL RELEASE

RELEASE OF CLAIMS

This Release of Claims (the “Release”) is entered into by Gaurav Aggarwal, M.D. (the “Executive”) pursuant to the Agreement of Employment dated April 8, 2016, by and between Ocera Therapeutics, Inc., a Delaware corporation (the “Company”), and the Executive (the “Agreement”). This Release is the release of legal claims referenced in Section 7(b) or 7(e) of the Agreement. Terms with initial capitalization that are not otherwise defined in this Release have the meanings set forth in the Agreement.

1.Consideration. The Company shall provide the Executive with the payments and benefits described in either Section 7(b) or 7(e) of the Agreement, at the times provided therein.

2.Release of Claims. The Executive voluntarily releases and forever discharges the Company and its predecessors, successors, assigns, and current and former members, equity holders. partners, directors, officers, employees, representatives, attorneys, agents, subsidiaries and all persons acting by, through, under or in concert with any of the foregoing (any and all of whom or which are hereinafter referred to as the “Releasees”), from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses (including attorney’s fees and costs actually incurred), of any nature whatsoever, known or unknown (collectively, “Claims”) that the Executive now has, owns or holds, or claims to have, own, or hold, or that he at any time had, owned, or held, or claimed to have had, owned, or held against any Releasee. This general release of Claims includes, without implication of limitation, the release of all Claims:

• relating to the Executive’s employment by and retirement from employment with the Company;

• of wrongful discharge;

• of breach of contract;

• of retaliation or discrimination under federal, state or local law (including, without limitation, Claims of age discrimination or retaliation under the Age Discrimination in Employment Act, Claims of disability discrimination or retaliation under the Americans with Disabilities Act, and Claims of discrimination or retaliation under Title VII of the Civil Rights Act of 1964;

• under any other federal or state statute, to the fullest extent that Claims may be released;

• of defamation or other torts;

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• of violation of public policy; and

• for damages or other remedies of any sort, including, without limitation, compensatory damages, punitive damages, injunctive relief and attorney’s fees.

• In granting the release herein, Executive understands that this Agreement includes a release of all claims known or unknown. In giving this release, which includes claims which may be unknown to Executive at present, Executive acknowledges that he has read and understands Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” Executive hereby expressly waives and relinquishes all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to the release of any unknown or unsuspected claims Executive may have against the Company or any Releasee.

3.Limitations on Release. Notwithstanding anything in Section 2 of this Release to the contrary, nothing in this Release limits the Executive’s rights to (i) any salary, bonus, vacation pay or any other compensation or benefits or reimbursement of expenses earned or accrued prior to the date hereof, (ii) indemnification by the Company that the Executive may have pursuant to any contract, the organizational documents of the Company and its subsidiaries or pursuant to applicable law or (iii) pursue a claim against the Company in the event that it breaches any of its obligations under the Agreement.

4.No Assignment. The Executive represents that he has not assigned to any other person or entity any Claims against any Releasee.

5.Right to Consider and Revoke Release. The Executive acknowledges that he has been given the opportunity to consider this Release for a period of twenty-one (21) days after the Executive receives this Release. In the event the Executive executed this Release within less than twenty-one (21) days, he acknowledges that such decision was entirely voluntary and that he had the opportunity to consider this Release until the end of the twenty-one (21) day period. To accept this Release, the Executive shall deliver a signed Release to the Companywithin such twenty-one (21) day period. For a period of seven (7) days from the date when the Executive executes this Release (the “Revocation Period”), he shall retain the right to revoke this Release by written notice that is received by the Company on or before the last day of the Revocation Period. This Release shall take effect only if it is executed within the twenty-one (21) day period as set forth above and if it is not revoked pursuant to the preceding sentence. If those conditions are satisfied, this Release shall become effective and enforceable on the date immediately following the last day of the Revocation Period (the “Effective Date”).

6.Other Terms.

(a)Legal Representation; Review of Release. The Executive acknowledges that he has been advised to discuss all aspects of this Release with his attorney, that he has

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carefully read and fully understands all of the provisions of this Release and that he is voluntarily entering into this Release.

(b)Binding Nature of Release. This Release shall be binding upon the Executive and upon his heirs, administrators, representatives and executors

(c)Amendment. This Release may be amended only upon a written agreement executed by the Executive and the Company.

(d)Severability. In the event that at any future time it is determined by an arbitrator or court of competent jurisdiction that any covenant, clause, provision or term of this Release is illegal, invalid or unenforceable, the remaining provisions and terms of this Release shall not be affected thereby and the illegal, invalid or unenforceable term or provision shall be severed from the remainder of this Release. In the event of such severance, the remaining covenants shall be binding and enforceable.

(e)Governing Law and Interpretation. This Release shall be deemed to be made and entered into in the state of California, and shall in all respects be interpreted, enforced and governed under the laws of California, without giving effect to the conflict of laws provisions of California law. The language of all parts of this Release shall in all cases be construed as a whole, according to its fair meaning, and not strictly for or against either the Company or the Executive.

(f)Entire Agreement; Absence of Reliance. The Executive acknowledges that he is not relying on any promises or representations by the Company or any of its agents, representatives or attorneys regarding any subject matter addressed in this Release.

So agreed by the Executive.

/s/ Gaurav Aggarwal	April 08, 2016
Gaurav Aggarwal, M.D.	Date

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APPENDIX B

California Labor Code Section 2870. Application of provision providing that employee shall assign or offer to assign rights in invention to employer.

(a)    Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

(1)    Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

(2)    Result from any work performed by the employee for his employer.

(b)    To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

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EX-10.3

Exhibit 10.3

OCERA THERAPEUTICS, INC.

NON-EMPLOYEE DIRECTOR COMPENSATION POLICY

As Amended and Restated

March 31, 2016

The purpose of this Non-Employee Director Compensation Policy, as amended and restated (this “Policy”), of Ocera Therapeutics, Inc., a Delaware corporation (the “Company”), is to provide a total compensation package that enables the Company to attract and retain, on a long-term basis, high caliber directors on the Company's Board of Directors (the “Board”) who are not employees or officers of the Company or its subsidiaries. This Policy will become effective as of the date this Policy is approved by the Board (the “Effective Date”).

In furtherance of this purpose, following the Effective Date, all non-employee Directors shall be paid cash compensation for services provided to the Company as set forth below.

	Annual Amount
Annual Retainer for each Board Member:	$35,000
Additional Retainer for the Chairman of the Board:	$25,000
Additional Retainer for Lead Independent Director	$20,000
Audit Committee Chair:	$17,500
Other Audit Committee Members:	$7,500
Compensation Committee Chair:	$10,000
Other Compensation Committee Members:	$5,000
Nominating and Corporate Governance Committee Chair:	$8,000
Other Nominating and Corporate Governance Committee Members:	$4,000

Additionally, the non-employee Directors shall be eligible to participate in the Company's stock option plans on a case by case basis as follows:

(a) Welcome Grants. Following the Effective Date, each person who is thereafter first appointed or first elected to the Board as a non-employee Director, is or will be eligible to receive a one-time option grant of an option to purchase 20,000 shares of the Company's common stock (the “Welcome Grant”). All non-employee Directors who are first appointed or first elected to the Board after the Effective Date shall receive his or her Welcome Grant promptly following the date that he or she is so appointed or elected to the Board, upon Board approval thereof. All Welcome Grants shall vest, as to 25% of the shares initially covered by such stock option, on the first anniversary date of the date of grant thereof with the balance of the shares subject thereto to vest in equal monthly installments over the next succeeding three year

period, provided, in all cases, that the non-employee Director is, as of such vesting date, then a director of the Company.

(b) Annual Grants. Annual grants of 12,500 stock options (the “Annual Grants”) shall be made to non-employee Directors in addition to the Welcome Grants, which grants shall vest in equal monthly installments over one year, with the first tranche vesting on the one month anniversary of the date of the grant, provided, in all cases, that the non-employee Director is, as of each such vesting date, then a director of the Company.

(c) Exercise Period Upon Departure. If a recipient of option grants under this Policy (the “Optionee”) ceases to be a Director for any reason, any portion of the Optionee’s Welcome Grant or Annual Grants outstanding on such date may be exercised, to the extent exercisable on the date the Optionee ceased to be a Director, for a period of three (3) years from the date the Optionee ceased to be a Director or until the expiration date of the applicable option grants, if earlier.  Any portion of the Welcome Grant or Annual Grants that is not exercisable on the date the Optionee ceases to be a Director shall terminate immediately and be of no further force or effect.

The foregoing compensation will be in addition to reimbursement of all out-of-pocket expenses incurred by non-employee Directors in attending meetings of the Board.

2

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:	May 3, 2016	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, Michael Byrnes, 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:	May 3, 2016	By:	/s/ Michael Byrnes
			Michael Byrnes
			Chief Financial Officer and Treasurer
			(Principal Financial and Accounting 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 March 31, 2016, 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, to my knowledge 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:	May 3, 2016	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 March 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Byrnes, Chief Financial 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, to my knowledge 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:	May 3, 2016	By:	/s/ Michael Byrnes
			Michael Byrnes
			Chief Financial Officer and Treasurer
			(Principal Financial and Accounting Officer)

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	Apr. 29, 2016
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	Accelerated Filer
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding		21,307,129

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Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 32,432	$ 35,921
Short-term investments, available-for-sale	7,420	7,415
Accounts receivable	93	59
Prepaid expenses and other current assets	559	627
Total current assets	40,504	44,022
Property and equipment, net	82	94
Deposits	0	26
Goodwill	595	595
Total assets	41,181	44,737
Current liabilities:
Accounts payable	1,285	701
Accrued liabilities	3,632	3,133
Notes payable - current	104	0
Total current liabilities	5,021	3,834
Notes payable - long term	9,451	9,508
Other liabilities	0	1
Total liabilities	$ 14,472	$ 13,343
Commitments and contingencies (Note 9)
Stockholders' equity:
Preferred stock - $0.00001 par value, 5,000,000 shares authorized and no shares issued or outstanding.	$ 0	$ 0
Common stock - $0.00001 par value, 100,000,000 shares authorized, 21,307,129 issued and outstanding at March 31, 2016 and 20,695,160 shares issued and outstanding at December 31, 2015.	0	0
Additional paid-in capital	165,655	162,832
Accumulated other comprehensive income (loss)	1	(5)
Accumulated deficit	(138,947)	(131,433)
Total stockholders' equity	26,709	31,394
Total liabilities and stockholders' equity	$ 41,181	$ 44,737

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Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Preferred stock, par value (in usd per share)	$ 0.00001	$ 0.00001
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in usd per share)	$ 0.00001	$ 0.00001
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	21,307,129	19,747,362
Common stock, shares, outstanding (in shares)	21,307,129	19,747,362

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Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Statement [Abstract]
Royalty revenue	$ 33	$ 31
Operating expenses:
Research and development	4,747	4,398
General and administrative	2,554	2,256
Amortization of intangibles	0	41
Total operating expenses	7,301	6,695
Other income (expense):
Interest and other income	33	27
Interest and other expense	(279)	(14)
Other income (expense), net	(246)	13
Net loss	$ (7,514)	$ (6,651)
Net loss per share:
Net loss per share, basic and diluted (in usd per share)	$ (0.36)	$ (0.34)
Weighted average number of shares used to compute net loss per share of common stock, basic and diluted (in shares)	20,943,966	19,747,362
Unrealized gain on investments	$ 6	$ 28
Comprehensive loss	$ (7,508)	$ (6,623)

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Statement of Cash Flows [Abstract]
Net loss	$ (7,514)	$ (6,651)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	12	8
Amortization of intangibles	0	41
Stock-based compensation	1,106	965
Accretion of premium on investment securities	22	154
Noncash interest expense	47	0
Changes in operating assets and liabilities:
Accounts receivable	(34)	31
Prepaid expenses and other assets	94	453
Accounts payable	544	88
Accrued liabilities	498	(8)
Net cash used in operating activities	(5,225)	(4,919)
Investing activities
Purchase of short-term investments	(3,754)	(13,414)
Proceeds from maturities of short-term investments	3,733	18,500
Net cash provided by (used in) investing activities	(21)	5,086
Financing activities
Proceeds from sale of common stock, net of underwriting commissions and issuance cost	1,746	0
Proceeds from exercise of common stock options	11	0
Net cash provided by financing activities	1,757	0
Net increase (decrease) in cash and cash equivalents	(3,489)	167
Cash and cash equivalents—beginning of period	35,921	10,127
Cash and cash equivalents—end of period	32,432	10,294
Supplemental disclosures of cash flow information
Cash paid for interest	207	0
Supplemental schedule of noncash investing and financing activities
Issuance cost related to at the market equity program in accounts payable	$ 40	$ 0

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The Company

3 Months Ended

Mar. 31, 2016

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 which has been granted orphan drug designation and Fast Track status by the U.S. Food and Drug Administration for the treatment of hyperammonemia and resultant hepatic encephalopathy in patients with liver cirrhosis, acute liver failure and acute-on-chronic liver disease.

On July 15, 2013, Terrapin Acquisition, Inc., a Delaware corporation (“Merger Sub”), a 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 was 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. (“Ocera Subsidiary”).

The Company's business is subject to significant risks consistent with biopharmaceutical companies seeking to develop technologies and product candidates for human therapeutic use. These risks include, but are not limited to, uncertainties regarding research and development, access to capital, obtaining and enforcing patents, receiving regulatory approval and competition with other biotechnology and pharmaceutical companies.

The Company has a limited operating history and the sales and income potential of the Company's business and market are unproven. As of March 31, 2016, the Company has incurred losses since inception of $138.9 million. The Company anticipates that it will continue to incur net losses into the foreseeable future as it continues the development and commercialization of OCR-002 and as it expands its corporate infrastructure. Based on the Company's current operating plan, the Company believes its working capital is sufficient to fund its operations through at least the next twelve months.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company and our wholly-owned subsidiary 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. For interim reporting 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, 2015.

Unaudited Interim Financial Information

The accompanying interim condensed 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 condensed financial statements, but does not include all disclosures required by U.S. GAAP for complete financial statements. 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.

Short-term investments

All investments have been classified as "available-for-sale" and are carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities. Unrealized gains and losses are excluded from earnings and are reported as a component of accumulated comprehensive income. Realized gains and losses and declines in fair value judged to be other than temporary, if any, on available-for-sale securities are included in interest and other income (expense), net. The cost of securities sold is based on the specific-identification method. Interest on marketable securities is included in interest and other income.

Recent Accounting Pronouncements

Occasionally, new accounting standards are issued or proposed by the Financial Accounting Standards Board (the "FASB"), or other standards-setting bodies that the Company adopts by the effective date specified within the standard. Unless otherwise discussed, standards that do not require adoption until a future date are not expected to have a material impact on the Company's condensed consolidated financial statements upon adoption.

(i) New Accounting Updates Recently Adopted

 In April 2015, the FASB issued Accounting Standards Update, or ASU 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. ASU 2015-05 relates to a customer’s accounting for fees paid in a cloud computing arrangement. This guidance requires that management evaluate each cloud computing arrangement in order to determine whether it includes a software license that must be accounted for separately from hosted services. The Company adopted this ASU with prospective application in the first quarter of 2016. The guidance did not have a material impact in the condensed consolidated financial results.

(ii) Recent Accounting Updates Not Yet Effective

In February 2016, the FASB issued Accounting Standards Update, or ASU 2016-02, Leases, to increase transparency and comparability among organizations by requiring recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements. The standard will become effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The guidance is required to be adopted at the earliest period presented using a modified retrospective approach. The Company is currently evaluating the impact of the adoption of this standard on our condensed consolidated financial statements.

In March 2016, the FASB issued Accounting Standards Update, or ASU 2016-06, Derivatives and Hedging (Topic 815), Contingent Put and Call Options in Debt Instruments. This ASU clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments in this ASU is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence.  The new standard simplifies the embedded derivative analysis for debt instruments containing contingent call or put options by removing the requirement to assess whether a contingent event is related to interest rates or credit risks. This guidance should be applied on a modified retrospective basis to existing debt instruments as of the beginning of the fiscal year in which the amendments are effective, and is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements.

In March 2016, the FASB issued Accounting Standards Update, or ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), Compensation - Stock Compensation. The new guidance simplifies several aspects of the accounting for share-based payments, including immediate recognition of all excess tax benefits and deficiencies in the income statement, changing the threshold to qualify for equity classification up to the employees' maximum statutory tax rates, allowing an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur, and clarifying the classification on the statement of cash flows for the excess tax benefit and employee taxes paid when an employer withholds shares for tax-withholding purposes. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, and interim periods within that reporting period. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2016

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 March 31, 2016, and December 31, 2015, 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: Inputs which include 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 reporting entity to develop its own assumptions.

None of the Company’s non-financial assets and liabilities are recorded at fair value on a non-recurring basis. No transfers between levels have occurred during the periods presented.

Assets measured at fair value on a recurring basis as of March 31, 2016 are as follows (in thousands):

	Balance as of March 31, 2016		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	$	27,878	$	27,878	$	—	$	—
Commercial paper	2,499		—		2,499		—
Corporate debt securities	9,308		—		9,308		—
Total assets	$	39,685	$	27,878	$	11,807	$	—

Assets measured at fair value on a recurring basis as of December 31, 2015 are as follows (in thousands):

	Balance as of December 31, 2015		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	$	34,806	$	34,806	$	—	$	—
Corporate debt securities	7,415		—		7,415		—
Total assets	$	42,221	$	34,806	$	7,415	$	—

The Company estimates the fair values of commercial paper and corporate debt securities by taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker quotes on the same or similar securities; issuer credit spreads; benchmark securities; prepayment or default projections based on historical data; and other observable inputs.

The estimated fair value of the Company's notes payable, considering level 2 inputs, approximates their carrying value based upon the borrowing terms and conditions currently available to the Company.

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Balance Sheet Components

3 Months Ended

Mar. 31, 2016

Balance Sheet Related Disclosures [Abstract]

Balance Sheet Components

Balance Sheet Components

Investments

The following table summarizes the Company's available for sale investments as of March 31, 2016(in thousands):

	Maturity (in Years)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Short-term investments:
Commercial paper	1 or less	$	2,498	$	1	$	—	$	2,499
Corporate debt securities	1 or less	4,921		—		—		4,921
Total short-term investments		$	7,419	$	1	$	—	$	7,420

The following table summarizes the Company's available for sale investments as of December 31, 2015 (in thousands):

	Maturity (in Years)	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Short-term investments:
Corporate debt securities	1 or less	$	7,420	$	—	$	(5	)	$	7,415
Total short-term investments		$	7,420	$	—	$	(5	)	$	7,415

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 that 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 in any of the periods presented.

Accrued Liabilities

Accrued liabilities were as follows (in thousands):

	March 31,		December 31,
	2016		2015
Clinical trials	$	2,646	$	1,666
Compensation and related expenses	547		993
Professional services	216		319
Interest expense	135		110
Other	88		45
Total accrued liabilities	$	3,632	$	3,133

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Notes Payable

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Notes Payable

Notes Payable

On July 30, 2015, the Company and Ocera Subsidiary entered into a Loan and Security Agreement (the “Loan Agreement”) with Oxford Finance LLC (“Oxford”) and Silicon Valley Bank (“SVB”) (collectively, the “Lenders”). The Loan Agreement provides for up to $20 million in new term loans (the “Term Loan Facility”), $10 million of which was funded on July 30, 2015. The remaining $10 million is available for draw until December 31, 2016 at the Company’s discretion, subject to achievement of certain financial and clinical milestones. The milestones will be satisfied if the Company (a) has raised proceeds of at least $15 million from the sale of equity securities or upfront payments from a partnership agreement and (b) achieved positive data from its ongoing Phase 2b clinical trial of OCR-002.

The annual interest rate for the initial $10 million funding is 8.275%, and the interest rate for the second tranche will be fixed upon drawdown at an annual rate that is greater of 8.275% or 8.085% plus the 30-day U.S. LIBOR rate. Loan payments are interest-only until February 1, 2017, followed by 30 equal monthly payments of principal and interest through the scheduled maturity date of August 1, 2019 if the second tranche is not drawn. If the second tranche is drawn, the interest-only period continues to August 1, 2017, followed by 24 equal monthly payments. In addition, a final payment equal to 3% of the aggregate amount drawn will be due at maturity or on earlier repayment. If the Company prepays all or a portion of the loans, a prepayment fee of between 1-3% of the principal amount prepaid will also be due depending on the timing of the prepayment.

At the initial funding, the Company received net proceeds of $9.7 million after fees and expenses. These fees and expenses are being accounted for as a debt discount and classified within notes payable on the Company’s balance sheet. Legal and consulting fees are presented in the balance sheet as a direct deduction from the carrying amount of the notes liability, consistent with debt discounts. Debt discounts, issuance costs and the final payment are being amortized or accreted as interest expense over the term of the loan using the effective interest method.

In connection with the Loan Agreement, the Company issued the Lenders warrants to purchase an aggregate of 97,680 shares of the Company's common stock at an exercise price of $4.095 per share. The Company recorded $0.3 million for the warrants as debt discount within notes payable and an increase to additional paid-in capital on the Company’s balance sheet. As of March 31, 2016, the warrants remained outstanding and exercisable. The debt discount is being amortized as interest expense over the term of the loan using the effective interest method.

The Term Loan Facility is secured by substantially all of the assets of the Company and its subsidiaries, except that the collateral does not include any intellectual property held by the Company or its subsidiary. However, the Company has agreed not to encumber any of the intellectual property of the Company or its subsidiary. The Loan Agreement contains customary representations, warranties and covenants by the Company, and customary indemnification obligations and events of default. The Company was in compliance with all covenants set forth in the Loan Agreement as of March 31, 2016.

The Company recorded interest expense related to the Term Loan Facility of $0.3 million for the three months ended March 31, 2016. The annual effective interest rate on the note payable, including the amortization of the debt discounts and accretion of the final payments, is 11.72%.

Future payments under the Loan Agreement as of March 31, 2016 are as follows (in thousands):

Years ending December 31:
2016 (Remaining Nine Months)	$	621
2017	3,839
2018	4,442
2019	3,261
Total minimum payments	12,163
Less amount representing interest	2,163
Notes payable, gross	10,000
Unamortized discount on notes payable	(445		)
Notes payable, balance	9,555
Less current portion of notes payable	104
Non-current portion of notes payable	$	9,451

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Stockholders' Equity

3 Months Ended

Mar. 31, 2016

Equity [Abstract]

Stockholders' Equity

Stockholders' Equity

On May 15, 2015, the Company entered into a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”), pursuant to which the Company may issue and sell shares of its common stock having aggregate sales proceeds of up to $25,000,000 from time to time through an “at the market” equity program under which Cowen acts as sales agent.

During the three months ended March 31, 2016, the Company sold an aggregate of 600,000 shares of common stock under the Sales Agreement, at an average price of approximately $3.00 per share, for gross proceeds of $1.80 million and net proceeds of $1.75 million after deducting commissions and other transactions costs. As of March 31, 2016, $19.5 million of common stock remained available to be sold under the Sales Agreement, subject to certain conditions specified therein.

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2016

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

Stock-Based Compensation

Stock-Based Compensation

The Company’s stock option activity and related information for the three months ended March 31, 2016 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, 2015	1,299,301		2,429,511		$	7.00	8.01	$	287
Stock options granted	(1,406,000	)	1,406,000		$	3.00
Stock options canceled	106,968		(106,968	)	$	4.81
Stock options exercised	—		(11,969	)	$	0.92
Balance at March 31, 2016	269		3,716,574		$	5.57	8.41	$	237
At March 31, 2016:
Vested and expected to vest			3,562,789		$	5.64	8.37	$	237
Exercisable			1,186,221		$	8.22	6.61	$	237

The aggregate intrinsic value of options exercised under all option plans was $25,000 and $0 for the three months ended March 31, 2016 and 2015, respectively, determined as of the date of option exercise.

The Company recognized stock-based compensation expense within the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):

	Three Months Ended March 31,
	2016		2015
Research and development	$	207	$	209
General and administrative	899		756
Total	$	1,106	$	965

The above table includes $10,000 of stock compensation expense for the three months ended March 31, 2016 related to stock option grants to consultants.

At March 31, 2016 there were 136,000 unvested options outstanding with performance conditions related to the achievement of certain clinical milestones. During the three months ended March 31, 2016, no expense has been recorded for the performance based options as it was not yet probable that such milestones would be met.

In March 2016, the Company amended its non-employee director compensation policy to increase the annual cash compensation for each non-employee member of its board of directors from $30,000 to $35,000, the annual cash compensation of the audit committee chairperson from $15,000 to $17,500 and the annual stock option grant from 10,000 to 12,500 shares.

As of March 31, 2016, there was unrecognized stock compensation expense of $8.8 million related to stock options and the Company expects to recognize those costs over a weighted average period of 2.47 years.

Stock-based compensation expense 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 all stock options granted was estimated using the following weighted-average assumptions:

	Three Months Ended March 31,
	2016	2015
Expected dividend yield	—	—
Risk-free interest rates	1.33% - 1.97%	1.52%
Expected term in years	4.66 - 8.04	6.08
Expected volatility	75% - 92%	91%

On January 6, 2016 the Company granted certain of its executive officers non-qualified stock options to purchase 206,625 shares of the Company’s common stock that vest on a monthly basis in equal installments over 48 months following the grant date if the Company's stock price equals or exceeds $6.00 for 20 consecutive trading days on or before June 30, 2017. The options expire ten years from the date of the grant.

The weighted-average fair values of these options was determined using a Monte Carlo simulation model incorporating the following assumptions:

	Three Months Ended March 31,
	2016	2015
Expected dividend yield	—	—
Risk-free interest rates	1.82% - 2.05%	—%
Expected term in years	6.02 - 8.00	—
Expected volatility	77% - 89%	—%
Weighted-average fair value per share	1.33 - 1.42	—

The estimated expense for these awards is being recognized on an accelerated basis over the estimated requisite service period, with no adjustments in the future periods based upon the Company's actual common stock price. During the three months ended March 31, 2016, the Company recorded $62,000 of share-based compensation expense in connection with the market condition stock option awards described above.

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Net Loss Per Share

3 Months Ended

Mar. 31, 2016

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 warrants and outstanding stock options have been excluded from the computation of diluted net loss per share as the effect of their inclusion would be considered 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.

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

	Three Months Ended March 31,
	2016			2015
Numerator
Net loss	$	(7,514	)	$	(6,651	)
Denominator
Weighted average common shares outstanding used to compute net loss per share, basic and diluted	20,943,966			19,747,362
Net loss per share of common stock, basic and diluted
Net loss per share	$	(0.36	)	$	(0.34	)

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 as the effect of their inclusion would have been considered anti-dilutive:

	Three Months Ended March 31,
	2016	2015
Common stock warrants	1,026,249	932,535
Common stock options	3,630,529	2,039,050
Total	4,656,778	2,971,585

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2016

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 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 $95,000 and $57,000 for the three months ended March 31, 2016 and 2015, respectively.

The following is a schedule of non-cancellable future minimum lease payments for operating leases as of March 31, 2016 (in thousands):

Years ending December 31:
2016 (Remaining Nine Months)	284
2017	15
Total	$	299

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Subsequent Events

3 Months Ended

Mar. 31, 2016

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

In April 2016, the Company’s board of directors approved, subject to stockholder approval at the Company’s 2016 annual meeting of shareholders, an amendment and restatement of the Company’s Third Amended and Restated 2011 Stock Option and Incentive Plan (the “2011 Plan”) to, among other things, increase the maximum number of shares that may be issued under the 2011 Plan from 3,602,328 to 5,002,328 shares. The amendment and restatement of the 2011 Plan will be voted on by the Company’s stockholders on at the annual meeting of shareholders scheduled for June 14, 2016.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company and our wholly-owned subsidiary 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. For interim reporting 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, 2015.

Consolidation

Unaudited Interim Financial Information

The accompanying interim condensed 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 condensed financial statements, but does not include all disclosures required by U.S. GAAP for complete financial statements. 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.

New Accounting Pronouncements

Recent Accounting Pronouncements

Occasionally, new accounting standards are issued or proposed by the Financial Accounting Standards Board (the "FASB"), or other standards-setting bodies that the Company adopts by the effective date specified within the standard. Unless otherwise discussed, standards that do not require adoption until a future date are not expected to have a material impact on the Company's condensed consolidated financial statements upon adoption.

(i) New Accounting Updates Recently Adopted

 In April 2015, the FASB issued Accounting Standards Update, or ASU 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. ASU 2015-05 relates to a customer’s accounting for fees paid in a cloud computing arrangement. This guidance requires that management evaluate each cloud computing arrangement in order to determine whether it includes a software license that must be accounted for separately from hosted services. The Company adopted this ASU with prospective application in the first quarter of 2016. The guidance did not have a material impact in the condensed consolidated financial results.

(ii) Recent Accounting Updates Not Yet Effective

In February 2016, the FASB issued Accounting Standards Update, or ASU 2016-02, Leases, to increase transparency and comparability among organizations by requiring recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements. The standard will become effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The guidance is required to be adopted at the earliest period presented using a modified retrospective approach. The Company is currently evaluating the impact of the adoption of this standard on our condensed consolidated financial statements.

In March 2016, the FASB issued Accounting Standards Update, or ASU 2016-06, Derivatives and Hedging (Topic 815), Contingent Put and Call Options in Debt Instruments. This ASU clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments in this ASU is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence.  The new standard simplifies the embedded derivative analysis for debt instruments containing contingent call or put options by removing the requirement to assess whether a contingent event is related to interest rates or credit risks. This guidance should be applied on a modified retrospective basis to existing debt instruments as of the beginning of the fiscal year in which the amendments are effective, and is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements.

In March 2016, the FASB issued Accounting Standards Update, or ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), Compensation - Stock Compensation. The new guidance simplifies several aspects of the accounting for share-based payments, including immediate recognition of all excess tax benefits and deficiencies in the income statement, changing the threshold to qualify for equity classification up to the employees' maximum statutory tax rates, allowing an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur, and clarifying the classification on the statement of cash flows for the excess tax benefit and employee taxes paid when an employer withholds shares for tax-withholding purposes. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, and interim periods within that reporting period. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements.

Earnings Per Share

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

Assets measured at fair value on a recurring basis as of March 31, 2016 are as follows (in thousands):

	Balance as of March 31, 2016		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	$	27,878	$	27,878	$	—	$	—
Commercial paper	2,499		—		2,499		—
Corporate debt securities	9,308		—		9,308		—
Total assets	$	39,685	$	27,878	$	11,807	$	—

Assets measured at fair value on a recurring basis as of December 31, 2015 are as follows (in thousands):

	Balance as of December 31, 2015		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	$	34,806	$	34,806	$	—	$	—
Corporate debt securities	7,415		—		7,415		—
Total assets	$	42,221	$	34,806	$	7,415	$	—

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Balance Sheet Components (Tables)

3 Months Ended

Mar. 31, 2016

Balance Sheet Related Disclosures [Abstract]

Available-for-sale Securities

The following table summarizes the Company's available for sale investments as of March 31, 2016(in thousands):

	Maturity (in Years)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Short-term investments:
Commercial paper	1 or less	$	2,498	$	1	$	—	$	2,499
Corporate debt securities	1 or less	4,921		—		—		4,921
Total short-term investments		$	7,419	$	1	$	—	$	7,420

The following table summarizes the Company's available for sale investments as of December 31, 2015 (in thousands):

	Maturity (in Years)	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Short-term investments:
Corporate debt securities	1 or less	$	7,420	$	—	$	(5	)	$	7,415
Total short-term investments		$	7,420	$	—	$	(5	)	$	7,415

Schedule of Accrued Liabilities

Accrued liabilities were as follows (in thousands):

	March 31,		December 31,
	2016		2015
Clinical trials	$	2,646	$	1,666
Compensation and related expenses	547		993
Professional services	216		319
Interest expense	135		110
Other	88		45
Total accrued liabilities	$	3,632	$	3,133

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Notes Payable (Tables)

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

Future payments under the Loan Agreement as of March 31, 2016 are as follows (in thousands):

Years ending December 31:
2016 (Remaining Nine Months)	$	621
2017	3,839
2018	4,442
2019	3,261
Total minimum payments	12,163
Less amount representing interest	2,163
Notes payable, gross	10,000
Unamortized discount on notes payable	(445		)
Notes payable, balance	9,555
Less current portion of notes payable	104
Non-current portion of notes payable	$	9,451

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2016

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 three months ended March 31, 2016 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, 2015	1,299,301		2,429,511		$	7.00	8.01	$	287
Stock options granted	(1,406,000	)	1,406,000		$	3.00
Stock options canceled	106,968		(106,968	)	$	4.81
Stock options exercised	—		(11,969	)	$	0.92
Balance at March 31, 2016	269		3,716,574		$	5.57	8.41	$	237
At March 31, 2016:
Vested and expected to vest			3,562,789		$	5.64	8.37	$	237
Exercisable			1,186,221		$	8.22	6.61	$	237

Stock-based compensation expense

The Company recognized stock-based compensation expense within the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):

	Three Months Ended March 31,
	2016		2015
Research and development	$	207	$	209
General and administrative	899		756
Total	$	1,106	$	965

Stock option valuation assumptions

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

	Three Months Ended March 31,
	2016	2015
Expected dividend yield	—	—
Risk-free interest rates	1.33% - 1.97%	1.52%
Expected term in years	4.66 - 8.04	6.08
Expected volatility	75% - 92%	91%

The weighted-average fair values of these options was determined using a Monte Carlo simulation model incorporating the following assumptions:

	Three Months Ended March 31,
	2016	2015
Expected dividend yield	—	—
Risk-free interest rates	1.82% - 2.05%	—%
Expected term in years	6.02 - 8.00	—
Expected volatility	77% - 89%	—%
Weighted-average fair value per share	1.33 - 1.42	—

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Net Loss Per Share (Tables)

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

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

	Three Months Ended March 31,
	2016			2015
Numerator
Net loss	$	(7,514	)	$	(6,651	)
Denominator
Weighted average common shares outstanding used to compute net loss per share, basic and diluted	20,943,966			19,747,362
Net loss per share of common stock, basic and diluted
Net loss per share	$	(0.36	)	$	(0.34	)

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

	Three Months Ended March 31,
	2016	2015
Common stock warrants	1,026,249	932,535
Common stock options	3,630,529	2,039,050
Total	4,656,778	2,971,585

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases

The following is a schedule of non-cancellable future minimum lease payments for operating leases as of March 31, 2016 (in thousands):

Years ending December 31:
2016 (Remaining Nine Months)	284
2017	15
Total	$	299

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The Company (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accumulated deficit	$ (138,947)	$ (131,433)

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Fair Value Measurements (Fair Value) (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	$ 39,685	$ 42,221
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	27,878	34,806
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	11,807	7,415
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	0	0
Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	27,878	34,806
Money market funds | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	27,878	34,806
Money market funds | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	0	0
Money market funds | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	0	0
Commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	2,499
Commercial paper | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	0
Commercial paper | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	2,499
Commercial paper | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	0
Corporate debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	9,308	7,415
Corporate debt securities | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	0	0
Corporate debt securities | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	9,308	7,415
Corporate debt securities | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	$ 0	$ 0

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Balance Sheet Components (Available For Sale Investments) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Estimated Fair Value	$ 7,420
Unrealized Gains	1
Unrealized Losses	0
Amortized Cost	7,419
Short-term Investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Estimated Fair Value		$ 7,415
Unrealized Gains		0
Unrealized Losses		(5)
Amortized Cost		7,420
Short-term Investments [Member] | Commercial paper
Schedule of Available-for-sale Securities [Line Items]
Estimated Fair Value	2,499
Unrealized Gains	1
Unrealized Losses	0
Amortized Cost	2,498
Short-term Investments [Member] | Corporate debt securities
Schedule of Available-for-sale Securities [Line Items]
Estimated Fair Value	4,921	7,415
Unrealized Gains	0	0
Unrealized Losses	0	(5)
Amortized Cost	$ 4,921	$ 7,420

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Balance Sheet Components (Accrued Liabilities) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Balance Sheet Related Disclosures [Abstract]
Clinical trials	$ 2,646	$ 1,666
Compensation and related expenses	547	993
Professional services	216	319
Interest expense	135	110
Other	88	45
Total accrued liabilities	$ 3,632	$ 3,133

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Notes Payable (Narrative) (Details) - USD ($)		3 Months Ended
	Jul. 30, 2015	Mar. 31, 2016
Oxford Finance LLC and Silicon Valley Bank
Debt Instrument [Line Items]
Interest expense		$ 300,000
Effective interest rate (in percentage)		11.72%
Notes Payable | Secured Debt | Oxford Finance LLC and Silicon Valley Bank
Debt Instrument [Line Items]
Debt instrument, maximum borrowing capacity	$ 20,000,000
Notes payable, gross	10,000,000	$ 10,000,000
Remaining borrowing capacity	10,000,000
Proceeds from sale of equity	$ 15,000,000
Stated interest rate ( in percentage)	8.275%
Periodic payment terms, balloon payment to be paid, percentage of funded borrowings (in percentage)	3.00%
Proceeds from debt, net of issuance costs	$ 9,700,000
Notes Payable | Secured Debt | Oxford Finance LLC and Silicon Valley Bank | Minimum
Debt Instrument [Line Items]
Early extinguishment of debt, prepayment fee (in percentage)	100.00%
Notes Payable | Secured Debt | Oxford Finance LLC and Silicon Valley Bank | Maximum
Debt Instrument [Line Items]
Early extinguishment of debt, prepayment fee (in percentage)	3.00%
Notes Payable | Secured Debt | Oxford Finance LLC and Silicon Valley Bank | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate (in percentage)	8.085%
Common stock warrants
Debt Instrument [Line Items]
Warrants issued (in shares)	97,680
Exercise price of warrants (usd per share)	$ 4.095
Warrants outstanding		$ 300,000

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Notes Payable (Schedule of Long Term Debt Instruments) (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015	Jul. 30, 2015
Debt Instrument [Line Items]
Less amount representing interest	$ 135,000	$ 110,000
Oxford Finance LLC and Silicon Valley Bank | Secured Debt | Notes Payable
Debt Instrument [Line Items]
2016 (Remaining Nine Months)	621,000
2017	3,839,000
2018	4,442,000
2019	3,261,000
Total minimum payments	12,163,000
Less amount representing interest	2,163,000
Notes payable, gross	10,000,000		$ 10,000,000
Unamortized discount on notes payable	(445,000)
Notes payable, balance	9,555,000
Less current portion of notes payable	104,000
Non-current portion of notes payable	$ 9,451,000

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Stockholders' Equity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	May. 15, 2015
Class of Stock [Line Items]
Stock issued during period, shares, new issues (in shares)	600
Common stock, par value, average (usd per share)	$ 3.00
Proceeds from issuance of common stock, net of issuance costs	$ 1,800
Proceeds from sale of common stock, net of underwriting commissions and issuance cost	1,746	$ 0
At the Market Issuance Sales Agreement [Member] | Cowen [Member]
Class of Stock [Line Items]
Common stock remained available to be sold under the sales agreement	$ 19,500		$ 25,000

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Stock-Based Compensation (Stock Option Activity) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Shares available for grant (in shares)	1,299,301
Stock options granted (in shares)	(1,406,000)
Stock options canceled (in shares)	106,968
Shares available for grant (in shares)	269	1,299,301
Stock Options Outstanding
Beginning balance, options (in shares)	2,429,511
Stock options granted (in shares)	1,406,000
Stock options canceled (in shares)	(106,968)
Stock options exercised (in shares)	(11,969)
Ending balance, options (in shares)	3,716,574	2,429,511
Stock options vested and expected to vest (in shares)	3,562,789
Stock options exercisable (in shares)	1,186,221
Weighted-average Exercise Price Per Share
Weighted-average exercise price, options outstanding (in usd per share)	$ 7.00
Grants in period (in usd per share)	3.00
Canceled in period (in usd per share)	4.81
Exercises in period (in usd per share)	0.92
Weighted-average exercise price, options outstanding (in usd per share)	5.57	$ 7.00
Weighted-average exercise price, options exercisable (in usd per share)	5.64
Weighted-average exercise price, options vested and expected to vest (in usd per share)	$ 8.22
Weighted-average remaining contractual life, options outstanding (in years)	8 years 4 months 28 days	8 years 4 days
Weighted-average remaining contractual life, options vested and expected to vest (in years)	8 years 4 months 13 days
Weighted-average remaining contractual life, options exercisable (in years)	6 years 7 months 10 days
Aggregate Intrinsic value, options outstanding	$ 237	$ 287
Aggregate Intrinsic value, options vested and expected to vest	237
Aggregate Intrinsic value, options exercisable	$ 237

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Stock-Based Compensation (Stock-based compensation expense) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 1,106	$ 965
Research and Development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	207	209
General and Administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 899	$ 756

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Stock-Based Compensation (Valuation Assumptions) (Details) - $ / shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Stock Options [Member]
Fair Value Assumptions and Methodology [Abstract]
Expected dividend yield (in percentage)	0.00%	0.00%
Risk free interest rate (in percentage)	1.33%
Risk free interest rate, maximum (in percentage)	1.97%
Risk free interest rate (in percentage)		1.52%
Expected life in years (in years)		6 years 29 days
Expected volatility, minimum (in percentage)	78.00%
Expected volatility, maximum (in percentage)	92.00%
Expected volatility (in percentage)		91.00%
Stock Options [Member] | Minimum
Fair Value Assumptions and Methodology [Abstract]
Expected life in years (in years)	4 years 7 months 28 days
Stock Options [Member] | Maximum
Fair Value Assumptions and Methodology [Abstract]
Expected life in years (in years)	8 years 15 days
Vest On Market Condition [Member] | Non Qualified Stock Option [Member]
Fair Value Assumptions and Methodology [Abstract]
Risk free interest rate (in percentage)	1.82%
Risk free interest rate, maximum (in percentage)	2.05%
Risk free interest rate (in percentage)	0.00%
Expected volatility, minimum (in percentage)	77.00%
Expected volatility, maximum (in percentage)	89.00%
Vest On Market Condition [Member] | Non Qualified Stock Option [Member] | Minimum
Fair Value Assumptions and Methodology [Abstract]
Expected life in years (in years)	6 years 7 days
Weighted average fair vale per share (in usd per share)	$ 1.33
Vest On Market Condition [Member] | Non Qualified Stock Option [Member] | Maximum
Fair Value Assumptions and Methodology [Abstract]
Expected life in years (in years)	8 years
Weighted average fair vale per share (in usd per share)	$ 1.42

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Stock-Based Compensation (Additional Information) (Details) - USD ($)			1 Months Ended	3 Months Ended
	Feb. 29, 2016	Jan. 06, 2016	Mar. 31, 2016	Mar. 31, 2016	Mar. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate intrinsic value of options exercised				$ 25,000	$ 0
Stock-based compensation expense				$ 1,106,000	$ 965,000
Stock options granted (in shares)				1,406,000
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation costs not yet recognized			$ 8,800,000	$ 8,800,000
Period for recognizing costs (in years)				2 years 5 months 18 days
Consultant Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense				$ 10,000
Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unvested options granted (in shares)			136,000	136,000
Vest On Market Condition [Member] | Non Qualified Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense				$ 62,000
Stock options granted (in shares)		206,625
Minimum stock price for the options to vest (in usd per share)		$ 6.00
Minimum stock price for the options to vest, number of consecutive trading days (in days)		20 days
Expiration period (in years)		10 years
Board of Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Annual stock option grant (in shares)	10,000		12,500	12,500
Board of Director [Member] | Non-employee Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Directors compensation	$ 30,000		$ 35,000
Board of Director [Member] | Audit Committee Chairperson [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Directors compensation	$ 15,000		$ 17,500

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Net Loss Per Share (Schedule of Basic and Diluted Loss Per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Numerator
Net loss	$ (7,514)	$ (6,651)
Denominator
Weighted average common shares outstanding used to compute net loss per share, basic and diluted (in shares)	20,943,966	19,747,362
Net loss per share of common stock, basic and diluted
Net loss per share (in usd per share)	$ (0.36)	$ (0.34)

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Net Loss Per Share (Schedule of Antidilutive Securities Excluded From Earnings Per Share) (Details) - shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	4,656,778	2,971,585
Common stock warrants | Common stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	1,026,249	932,535
Stock Options [Member] | Common stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	3,630,529	2,039,050

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Commitments and Contingencies (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Commitments and Contingencies Disclosure [Abstract]
Rent expense	$ 95	$ 57
Future Minimum Payments Due by Fiscal Year Maturity [Abstract]
2016 (Remaining Nine Months)	284
2017	15
Total	$ 299

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Subsequent Events (Details) - shares	3 Months Ended
	Mar. 31, 2016	Apr. 29, 2016
Subsequent Event [Line Items]
Number of shares, authorized (in shares)	3,602,328
Stock issued during period, shares, new issues (in shares)	600,000
2011 Plan [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Number of shares, authorized (in shares)		5,002,328