10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2015

OR

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

FOR THE TRANSITION PERIOD FROM                      TO                     

Commission file number: 001-36003

CONATUS PHARMACEUTICALS INC.

(Exact name of registrant as specified in its charter)

Delaware	20-3183915
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
16745 W. Bernardo Dr., Suite 200
San Diego, CA	92127
(Address of Principal Executive Offices)	(Zip Code)

(858) 376-2600

(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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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  ¨

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

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	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

As of May 1, 2015, the registrant had 19,737,407 shares of common stock ($0.0001 par value) outstanding.

CONATUS PHARMACEUTICALS INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	3
	Condensed Balance Sheets	3
	Condensed Statements of Operations and Comprehensive Loss	4
	Condensed Statements of Cash Flows	5
	Notes to Condensed Financial Statements	6
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	13
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	19
ITEM 4.	CONTROLS AND PROCEDURES	20
PART II. OTHER INFORMATION
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	21
ITEM 5.	OTHER INFORMATION	22
ITEM 6.	EXHIBITS	22
SIGNATURES		23
EXHIBIT INDEX		24

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Conatus Pharmaceuticals Inc.

Condensed Balance Sheets

(Unaudited)

	March 31, 2015			December 31, 2014
Assets
Current assets:
Cash and cash equivalents	$	8,302,715		$	9,912,674
Marketable securities		22,700,616			27,159,272
Prepaid and other current assets		541,111			796,818
Total current assets		31,544,442			37,868,764
Property and equipment, net		219,970			237,066
Other assets		558,704			342,051
Total assets	$	32,323,116		$	38,447,881
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	2,249,497		$	3,003,612
Accrued compensation		875,533			1,171,621
Total current liabilities		3,125,030			4,175,233
Note payable		1,000,000			1,000,000
Deferred rent		93,994			58,699
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, $0.0001 par value; 200,000,000 shares authorized; 15,712,407 shares issued and 15,609,230 shares outstanding, excluding 103,177 shares subject to repurchase, at March 31, 2015; 15,695,834 shares issued and 15,560,614 shares outstanding, excluding 135,220 shares subject to repurchase, at December 31, 2014		1,561			1,556
Additional paid-in capital		130,835,119			129,976,075
Accumulated other comprehensive loss		(2,539	)		(13,297	)
Accumulated deficit		(102,730,049	)		(96,750,385	)
Total stockholders’ equity		28,104,092			33,213,949
Total liabilities and stockholders’ equity	$	32,323,116		$	38,447,881

See accompanying notes to condensed financial statements.

3

Conatus Pharmaceuticals Inc.

Condensed Statements of Operations and Comprehensive Loss

(Unaudited)

	Three Months Ended March 31,
	2015			2014
Operating expenses:
Research and development	$	3,883,613		$	3,650,598
General and administrative		2,081,309			1,595,247
Total operating expenses		5,964,922			5,245,845
Other income (expense):
Interest income		11,419			20,773
Interest expense		(17,500	)		(17,500	)
Other expense		(8,661	)		(784	)
Total other (expense) income		(14,742	)		2,489
Net loss		(5,979,664	)		(5,243,356	)
Other comprehensive income (loss):
Net unrealized gains (losses) on marketable securities		10,758			(13,371	)
Comprehensive loss	$	(5,968,906	)	$	(5,256,727	)
Net loss per share, basic and diluted	$	(0.38	)	$	(0.34	)
Weighted average shares outstanding used in computing net loss per share, basic and diluted		15,581,886			15,412,498

See accompanying notes to condensed financial statements.

4

Conatus Pharmaceuticals Inc.

Condensed Statements of Cash Flows

(Unaudited)

	Three Months Ended March 31,
	2015			2014
Operating activities
Net loss	$	(5,979,664	)	$	(5,243,356	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		17,096			3,356
Stock-based compensation expense		821,672			379,433
Amortization of premium on marketable securities		102,775			195,533
Changes in operating assets and liabilities:
Prepaid and other current assets		272,957			(141,660	)
Other assets		—			(62,981	)
Accounts payable and accrued expenses		(939,801	)		665,628
Accrued compensation		(278,069	)		(857,078	)
Deferred rent		35,295			—
Net cash used in operating activities		(5,947,739	)		(5,061,125	)
Investing activities
Maturities of marketable securities		14,578,000			13,031,000
Purchase of marketable securities		(10,211,361	)		(9,642,248	)
Capital expenditures		—			(12,918	)
Net cash provided by investing activities		4,366,639			3,375,834
Financing activities
Deferred public offering costs		(30,965	)		—
Proceeds from exercise of stock options		2,106			12,000
Net cash (used in) provided by financing activities		(28,859	)		12,000
Net decrease in cash and cash equivalents		(1,609,959	)		(1,673,291	)
Cash and cash equivalents at beginning of period		9,912,674			4,158,953
Cash and cash equivalents at end of period	$	8,302,715		$	2,485,662
Supplemental disclosure of cash flow information:
Cash paid for interest	$	17,500		$	17,500
Supplemental schedule of noncash investing and financing activities:
Deferred public offering costs included in accounts payable	$	185,688		$	—

See accompanying notes to condensed financial statements.

5

Conatus Pharmaceuticals Inc.

Notes to Condensed Financial Statements

(Unaudited)

1. Organization and Basis of Presentation

Conatus Pharmaceuticals Inc. (the Company) was incorporated in the state of Delaware on July 13, 2005. The Company is a biotechnology company focused on the development and commercialization of novel medicines to treat liver disease.

As of March 31, 2015, the Company has devoted substantially all of its efforts to product development and has not realized revenues from its planned principal operations.

The Company has a limited operating history, and the sales and income potential of the Company’s business and market are unproven. The Company has experienced net losses since its inception and, as of March 31, 2015, had an accumulated deficit of $102.7 million. The Company expects to continue to incur net losses for at least the next several years. Successful transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support the Company’s cost structure. If the Company is unable to generate revenues adequate to support its cost structure, the Company may need to raise additional equity or debt financing.

The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and the rules and regulations of the Securities and Exchange Commission (SEC) related to a quarterly report on Form 10-Q. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. The unaudited interim condensed financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. All such adjustments are of a normal and recurring nature. The operating results presented in these unaudited interim condensed financial statements are not necessarily indicative of the results that may be expected for any future periods. These unaudited interim condensed financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2014 included in the Company’s annual report on Form 10-K filed with the SEC on March 13, 2015.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash. Additionally, the Company established guidelines regarding approved investments and maturities of investments, which are designed to maintain safety and liquidity.

6

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity from the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include cash in readily available checking and money market accounts.

Marketable Securities

The Company classifies its marketable securities as available-for-sale and records such assets at estimated fair value in the condensed balance sheets, with unrealized gains and losses, if any, reported as a component of other comprehensive income (loss) within the condensed statements of operations and comprehensive loss and as a separate component of stockholders’ equity. The Company classifies marketable securities with remaining maturities greater than one year as current assets because such marketable securities are available to fund the Company’s current operations. The Company invests its excess cash balances primarily in corporate debt securities and money market funds with strong credit ratings. Realized gains and losses are calculated on the specific identification method and recorded as interest income. There were no realized gains and losses for the three-month periods ended March 31, 2015 and 2014.

At each balance sheet date, the Company assesses available-for-sale securities in an unrealized loss position to determine whether the unrealized loss is other-than-temporary. The Company considers factors including: the significance of the decline in value compared to the cost basis, underlying factors contributing to a decline in the prices of securities in a single asset class, the length of time the market value of the security has been less than its cost basis, the security’s relative performance versus its peers, sector or asset class, expected market volatility and the market and economy in general. When the Company determines that a decline in the fair value below its cost basis is other-than-temporary, the Company recognizes an impairment loss in the period in which the other-than-temporary decline occurred. There have been no other-than-temporary declines in the value of marketable securities, as it is more likely than not the Company will hold the securities until maturity or a recovery of the cost basis.

Fair Value of Financial Instruments

The carrying amounts of prepaid and other current assets, accounts payable and accrued expenses are reasonable estimates of their fair value because of the short maturity of these items.

Stock-Based Compensation

Stock-based compensation expense for stock option grants under the Company’s stock option plans is recorded at the estimated fair value of the award as of the grant date and is recognized as expense on a straight-line basis over the requisite service period of the stock-based award. Stock-based compensation expense for employee stock purchases under the Company’s 2013 Employee Stock Purchase Plan (the ESPP) is recorded at the estimated fair value of the purchase as of the plan enrollment date and is recognized as expense on a straight-line basis over the applicable six-month ESPP offering period. The estimation of stock option and employee stock purchase plan fair value requires management to make estimates and judgments about, among other things, employee exercise behavior, forfeiture rates and volatility of the Company’s common stock. The judgments directly affect the amount of compensation expense that will be recognized.

Property and Equipment

Property and equipment, which consists of furniture and fixtures, computers and office equipment and leasehold improvements, are stated at cost and depreciated over the estimated useful lives of the assets (three to five years) using the straight-line method. Leasehold improvements are amortized over the shorter of their estimated useful lives or the lease term.

Long-Lived Assets

The Company regularly reviews the carrying value and estimated lives of all of its long-lived assets, including property and equipment, to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives. The determinants used for this evaluation include management’s estimate

7

of the asset’s ability to generate positive income from operations and positive cash flow in future periods, as well as the strategic significance of the assets to the Company’s business objective. Should an impairment exist, the impairment loss would be measured based on the excess of the carrying amount of the asset’s fair value. The Company has not recognized any impairment losses through March 31, 2015.

Research and Development Expenses

All research and development costs are expensed as incurred.

Income Taxes

The Company’s policy related to accounting for uncertainty in income taxes prescribes a recognition threshold and measurement attribute criteria for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. As of December 31, 2014, there are no unrecognized tax benefits included in the condensed balance sheet that would, if recognized, affect the Company’s effective tax rate, and the Company has noted no material changes through March 31, 2015. The Company has not recognized interest and penalties in the condensed balance sheets or condensed statements of operations and comprehensive loss. The Company is subject to U.S. and California taxation. As of December 31, 2014, the Company’s tax years beginning 2005 to date are subject to examination by taxing authorities.

Comprehensive Loss

The Company is required to report all components of comprehensive loss, including net loss, in the condensed financial statements in the period in which they are recognized. Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from nonowner sources, including unrealized gains and losses on marketable securities. Comprehensive gains (losses) have been reflected in the condensed statements of operations and comprehensive loss for all periods presented.

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is used in making decisions regarding resource allocation and assessing performance. To date, the Company has viewed its operations and managed its business as one segment operating primarily in the United States.

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. The Company’s potentially dilutive securities, which include warrants, outstanding stock options under the Company’s stock option plans, common stock subject to repurchase by the Company and potential shares to be purchased under the ESPP, have been excluded from the computation of diluted net loss per share in the periods in which they would be anti-dilutive. For all periods presented, there is no difference in the number of shares used to compute basic and diluted shares outstanding due to the Company’s net loss position.

8

The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because to do so would be anti-dilutive:

	March 31,
	2015		2014
Warrants to purchase common stock		149,704		149,704
Common stock options		2,370,073		1,615,719
Common stock subject to repurchase		103,177		207,680
ESPP shares pending issuance		5,154		—
Total		2,628,108		1,973,103

Recent Accounting Pronouncements

In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This guidance requires management to perform interim and annual assessments on whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year of the date the financial statements are issued. If such conditions or events exist, certain disclosures are required. ASU No. 2014-15 is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the impact of the pending adoption of ASU No. 2014-15 on its financial statements and related disclosures.

3. Fair Value Measurements

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1:	Includes financial instruments for which quoted market prices for identical instruments are available in active markets.
Level 2:	Includes financial instruments for which there are inputs other than quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets with insufficient volume or infrequent transaction (less active markets) or model-driven valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3:	Includes financial instruments for which fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including management’s own assumptions.

9

Below is a summary of assets and liabilities measured at fair value as of March 31, 2015 and December 31, 2014.

			Fair Value Measurements Using
	March 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	$	6,671,248	$	6,671,248	$	—	$	—
Corporate debt securities		22,700,616		—		22,700,616		—
Total assets	$	29,371,864	$	6,671,248		22,700,616	$	—

			Fair Value Measurements Using
	December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Money market funds	$	6,998,111	$	6,998,111	$	—	$	—
Municipal bonds		70,000		—		70,000		—
Corporate debt securities		28,589,331		—		28,589,331		—
Total assets	$	35,657,442	$	6,998,111	$	28,659,331	$	—

The Company’s marketable securities, consisting principally of debt securities, are classified as available-for-sale, are stated at fair value, and consist of Level 2 financial instruments in the fair value hierarchy. The Company determines the fair value of its debt security holdings based on pricing from a service provider. The service provider values the securities based on using market prices from a variety of industry-standard independent data providers. Such market prices may be quoted prices in active markets for identical assets (Level 1 inputs) or pricing determined using inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs), such as yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures.

4. Marketable Securities

The Company invests its excess cash in money market funds and debt instruments of financial institutions, corporations, government sponsored entities and municipalities. The following tables summarize the Company’s marketable securities:

As of March 31, 2015	Maturity (in years)		Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Corporate debt securities		1 or less	$	22,703,155	$	2,675	$	(5,214	)	$	22,700,616
Total			$	22,703,155	$	2,675	$	(5,214	)	$	22,700,616
As of December 31, 2014	Maturity (in years)		Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Corporate debt securities		1 or less	$	25,795,008	$	1,137	$	(9,223	)	$	25,786,922
Corporate debt securities		1 - 2		1,307,561		—		(5,211	)		1,302,350
Municipal bonds		1 or less		70,000		—		—			70,000
Total			$	27,172,569	$	1,137	$	(14,434	)	$	27,159,272

10

5. Property and Equipment

Property and equipment consist of the following:

	Useful Life in Years	March 31, 2015			December 31, 2014
Furniture and fixtures	4	$	239,788		$	239,788
Computer equipment and office equipment	4		162,921			162,921
Leasehold improvements	5		61,533			61,533
			464,242			464,242
Less accumulated depreciation and amortization			(244,272	)		(227,176	)
		$	219,970		$	237,066

6. Note Payable

In July 2010, the Company entered into a $1.0 million promissory note payable to Pfizer Inc. (Pfizer). The note bears interest at 7% per annum, which is paid quarterly, and matures on July 29, 2020. The note payable prohibits the Company from paying cash dividends and is subject to acceleration upon specified events of default as defined in the agreement, including the failure to notify Pfizer of certain material adverse events. In July 2013, the note payable to Pfizer was amended to become convertible into shares of the Company’s common stock following the completion of the Company’s initial public offering (IPO), at the option of the holder, at a price per share equal to the fair market value of the common stock on the date of conversion.

7. Stockholders’ Equity

Common Stock

In July 2013, the Company completed the IPO of 6,000,000 shares of common stock at an offering price of $11.00 per share. The Company received net proceeds of approximately $58.6 million, after deducting underwriting discounts and commissions and offering-related transaction costs.

On August 14, 2014, the Company entered into an At Market Issuance Sales Agreement (the Sales Agreement) with MLV & Co. LLC (MLV), pursuant to which the Company may sell from time to time, at its option, up to an aggregate of $50.0 million of shares of its common stock through MLV, as sales agent. Sales of the Company’s common stock made pursuant to the Sales Agreement, if any, will be made on The NASDAQ Global Market (Nasdaq) by means of ordinary brokers’ transactions at market prices. Additionally, under the terms of the Sales Agreement, the Company may also sell shares of its common stock through MLV, on Nasdaq or otherwise, at negotiated prices or at prices related to the prevailing market price. Under the terms of the Sales Agreement, MLV may not engage in any proprietary trading or trading as principal for MLV’s own account. MLV has agreed to use commercially reasonable efforts consistent with its normal trading and sales practices to sell the Company’s common stock from time to time, based upon the Company’s instructions (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company cannot provide any assurances that it will issue any shares pursuant to the Sales Agreement. The Company has agreed to pay a commission rate equal to up to 3% of the gross sales price per share sold. The Company has also agreed to provide MLV with customary indemnification and contribution rights. The Company has incurred legal and accounting costs of approximately $0.3 million, as of March 31, 2015, in connection with the commencement of the Sales Agreement, which are recorded in other assets on the balance sheet until such time as the Company issues shares pursuant to the Sales Agreement. As of March 31, 2015, no shares were issued pursuant to the Sales Agreement.

In April 2015, the Company completed a public offering of 4,025,000 shares of its common stock at a public offering price of $5.75 per share. The shares were registered pursuant to a registration statement on Form S-3 filed on August 14, 2014. The Company received net proceeds of approximately $21.4 million, after deducting underwriting discounts and commissions and estimated offering-related transaction costs. The Company has incurred legal and accounting costs of approximately $0.2 million, as of March 31, 2015, in connection with this public offering, including certain costs associated with the preparation of the related registration statement on Form S-3, which are recorded in other assets on the balance sheet.

11

Warrants

In 2013, the Company issued warrants exercisable for 1,124,026 shares of Series B preferred stock, at an exercise price of $0.90 per share, to certain existing investors in conjunction with a private placement (the 2013 Warrants) and warrants exercisable for 111,112 shares of Series B preferred stock, at an exercise price of $0.90 per shares, to Oxford Finance LLC and Silicon Valley Bank in conjunction with a loan and security agreement (the Lender Warrants). Upon completion of the IPO, the 2013 Warrants and the Lender Warrants became exercisable for 136,236 and 13,468 shares of common stock, respectively, at an exercise price of $7.43 per share. The 2013 Warrants and the Lender Warrants will expire on May 30, 2018 and July 3, 2023, respectively.

Stock Options

The following table summarizes the Company’s stock option activity under all stock option plans for the three months ended March 31, 2015:

	Total Options			Weighted- Average Exercise Price
Balance at December 31, 2014		1,859,034		$	6.84
Granted		552,250			6.43
Exercised		(19,211	)		1.02
Cancelled		(22,000	)		8.32
Balance at March 31, 2015		2,370,073		$	6.78

Stock-Based Compensation

The Company recorded stock-based compensation of $821,672 and $379,433 for the three months ended March 31, 2015 and 2014, respectively.

Common Stock Reserved for Future Issuance

The following shares of common stock are reserved for future issuance at March 31, 2015:

Common stock warrants	149,704
Stock options issued and outstanding	2,370,073
Authorized for future option grants	661,038
Authorized for the ESPP	450,000
	3,630,815

8. Commitments

In February 2014, the Company entered into a noncancelable operating lease for certain office space starting in July 2014 through December 2019 with a renewal option for an additional five years. Future minimum payments under this noncancelable operating lease total approximately $1.4 million at March 31, 2015.

Rent expense was $71,130 and $44,883 for the three months ended March 31, 2015 and 2014, respectively.

In July 2010, the Company entered into a stock purchase agreement with Pfizer, pursuant to which the Company acquired all of the outstanding stock of Idun Pharmaceuticals, Inc., which was subsequently spun off to the Company’s stockholders in January 2013. Under the agreement, the Company may be required to make payments to Pfizer totaling $18.0 million upon the achievement of specified regulatory milestones.

12

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis and the unaudited interim condensed financial statements included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2014 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our annual report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on March 13, 2015.

Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this quarterly report, including statements regarding our future results of operations and financial position, business strategy, prospective products, product approvals, research and development costs, timing and likelihood of success, plans and objectives of management for future operations and future results of anticipated products, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important 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 the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this quarterly report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward- looking statements speak only as of the date of this quarterly report and are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A, “Risk Factors.” The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

Overview

We are a biotechnology company focused on the development and commercialization of novel medicines to treat liver disease. Our lead compound, emricasan, is a first-in-class, orally active pan-caspase protease inhibitor designed to reduce the activity of human caspases, which are enzymes that mediate inflammation and apoptosis. We believe that by reducing the activity of these enzymes, emricasan has the potential to interrupt the progression of liver disease and potentially provide treatment options in multiple areas of liver disease. We have observed compelling preclinical and clinical trial results that suggest emricasan may have clinical utility in slowing progression of liver disease regardless of the original cause of the disease. To date, emricasan has been studied in over 550 subjects in fourteen clinical trials. In multiple Phase 2b clinical trials, emricasan demonstrated statistically significant, consistent, rapid and sustained reduction in elevated levels of key biomarkers of inflammation and apoptosis implicated in the severity and progression of liver disease.

We are conducting a comprehensive clinical program to demonstrate the therapeutic benefit of emricasan in patients with chronic liver disease across the spectrum of liver disease. The following table summarizes our current development programs for emricasan.

13

Target Therapeutic Area	Description of Patient Population		Development Program
Non-alcoholic Steatohepatitis, or NASH	NASH patients suffer from inflammation due to fat buildup in the liver, which can progress to cirrhosis, liver cancer and liver failure.	•	In March 2014, we initiated a Phase 2 clinical trial for patients with non-alcoholic fatty liver disease, or NAFLD, including NASH. We reported top-line results from this clinical trial in March 2015 and are pursuing initial registration opportunities in patients with NASH cirrhosis.
Portal Hypertension, or PH	These cirrhosis patients have an increase in the pressure within the portal vein, which is caused by a blockage in the blood flow through the liver.	•	In September 2014, we initiated an exploratory, open-label Phase 2 clinical trial in PH patients. Top-line results from this clinical trial are expected to be available in the third quarter of 2015.
Liver Cirrhosis, or LC	In LC patients, healthy liver tissue is replaced with scar tissue resulting in abnormal structure and function of the liver.	•	In September 2014, we initiated a Phase 2 clinical trial in LC patients. Initial results from this clinical trial are expected to be available in the fourth quarter of 2015.
Post-orthotopic Liver Transplant, or POLT, Recipients with Reestablished Liver Fibrosis as a Result of Recurrent Hepatitis C Virus, or HCV, Infection Who Have Achieved a Sustained Viral Response, or SVR, following HCV Antiviral Therapy, or POLT-HCV-SVR	This population includes liver transplant patients with fibrosis from recurrent HCV and subsequent SVR.	•	In May 2014, we initiated a placebo-controlled Phase 2b clinical trial tracking biomarkers and histology in POLT patients who respond to antiviral therapy but still have underlying liver fibrosis. We expect to have pre-treatment histology and biomarker data from this clinical trial in the second quarter of 2015.

We recently met with the U.S. Food and Drug Administration, or FDA, to discuss our proposed initial registration pathway for emricasan in patients with liver cirrhosis due to NASH. In the meeting, the FDA provided feedback on our proposed patient populations and methods of measuring and analyzing published validated surrogate endpoints of Model for End-stage Liver Disease, or MELD, score, Child Pugh Turcotte, or CPT, score, and hepatic venous pressure gradient, or HVPG, in patients with NASH cirrhosis. Specific design details for registration trials are expected to be finalized based on results expected in the second half of 2015 from our two ongoing cirrhosis clinical trials and additional feedback from regulatory agencies. We also discussed the use of histology-based endpoints for future clinical trials in the FDA meeting, and we are evaluating the potential to include a clinical trial in patients with NASH-driven fibrosis as a component of our overall emricasan registration strategy. We believe a clinical trial in NASH fibrosis could also provide additional safety data supportive of an initial registration in NASH cirrhosis.

Since our inception, our primary activities have been organizational activities, including recruiting personnel, conducting research and development, including clinical trials, and raising capital. We have funded our operations since inception primarily through sales of equity securities and convertible promissory notes.

We have no products approved for sale. We have not generated any revenues to date, and we have incurred significant operating losses since our inception. We have never been profitable and have incurred consolidated net losses of approximately $22.3 million and $15.6 million in the years ended December 31, 2014 and 2013, respectively, and $6.0 million for the three months ended March 31, 2015. As of March 31, 2015, we had an accumulated deficit of $102.7 million.

We expect to continue to incur significant operating losses and negative cash flows from operating activities for the foreseeable future as we continue the clinical development of emricasan and seek regulatory approval for and, if approved, pursue commercialization of emricasan. As of March 31, 2015, we had cash, cash equivalents and marketable securities of approximately $31.0 million. To fund further operations, we will need to raise additional capital. In August 2014, we entered into an At Market Issuance Sales Agreement, or the Sales Agreement, with MLV & Co. LLC, or MLV, pursuant to which we may sell from time to time, at our option, up to an aggregate of $50.0 million of shares of our common stock in “at-the-market” offerings. As of March 31, 2015, no shares were issued pursuant to the Sales Agreement.

14

In April 2015, we completed a public offering of 4,025,000 shares of our common stock at a public offering price of $5.75 per share. We received net proceeds of approximately $21.4 million, after deducting underwriting discounts and commissions and estimated offering-related transaction costs. We may obtain additional financing in the future through the issuance of our common stock in future public offerings, including under the Sales Agreement, through other equity or debt financings or through collaborations or partnerships with other companies. Although it is difficult to predict future liquidity requirements, we believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operations for at least the next 12 months. We will need to raise additional funds to complete additional clinical trials of emricasan, to fund regulatory filings for emricasan in the United States and the European Union and for potential commercialization of emricasan.

However, successful transition to profitability is dependent upon achieving a level of revenues adequate to support our cost structure. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities and, unless and until we do, we will need to raise substantial additional capital through equity or debt financings or through collaborations or partnerships with other companies. We may not be able to raise additional capital on terms acceptable to us, or at all, and any failure to raise capital as and when needed could have a material adverse effect on our results of operations, financial condition and our ability to execute on our business plan.

JOBS Act

In April 2012, the Jumpstart Our Business Startups Act of 2012, or JOBS Act, was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for an “emerging growth company.” As an “emerging growth company,” we are electing not to take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision not to take advantage of the extended transition period is irrevocable. In addition, we are in the process of evaluating the benefits of relying on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if as an “emerging growth company” we choose to rely on such exemptions, we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our initial public offering, or IPO, or until we no longer meet the requirements of being an “emerging growth company,” whichever is earlier.

Financial Overview

Revenues

We currently have no products approved for sale, and we have not generated any revenues to date. We have not submitted any drug candidate for regulatory approval. In the future, we may generate revenues from a combination of milestone payments, reimbursements and royalties in connection with any future collaboration we may enter into with respect to emricasan, as well as product sales from emricasan. However, we do not expect to receive revenues unless and until we receive approval for emricasan or potentially enter into collaboration agreements for emricasan. If we fail to achieve clinical success in the development of emricasan in a timely manner and/or obtain regulatory approval for this drug candidate, our ability to generate future revenues would be materially adversely affected.

15

Research and Development Expenses

The majority of our operating expenses to date have been incurred in research and development activities. Starting in late 2011, research and development expenses have been focused on the development of emricasan. Since acquiring emricasan in 2010, we have incurred approximately $34.6 million in the development of emricasan through March 31, 2015. Our business model is currently focused on the development of emricasan in various liver diseases and is dependent upon our continuing to conduct research and a significant amount of clinical development. Our research and development expenses consist primarily of:

• expenses incurred under agreements with contract research organizations, or CROs, investigative sites and consultants that conduct our clinical trials and our preclinical studies;

• employee-related expenses, which include salaries and benefits;

• the cost of finalizing our chemistry, manufacturing and controls, or CMC, capabilities and providing clinical trial materials; and

• costs associated with other research activities and regulatory approvals.

Research and development costs are expensed as incurred.

At this time, due to the inherently unpredictable nature of preclinical and clinical development, we are unable to estimate with any certainty the costs we will incur in the continued development of emricasan. Clinical development timelines, the probability of success and development costs can differ materially from expectations.

We are currently focused on advancing emricasan in multiple indications, and our future research and development expenses will depend on its clinical success. In addition, we cannot forecast with any degree of certainty whether emricasan will be the subject of future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

Research and development expenditures will continue to be significant and will increase as we continue clinical development of emricasan over at least the next several years. We expect to incur significant development costs as we conduct our ongoing and future Phase 2 and Phase 3 clinical trials of emricasan, subject to receiving input from regulatory authorities.

The costs of clinical trials may vary significantly over the life of a project owing to factors that include but are not limited to the following:

• per patient trial costs;

• the number of patients that participate in the clinical trials;

• the number of sites included in the clinical trials;

• the countries in which the clinical trials are conducted;

• the length of time required to enroll eligible patients;

• the number of doses that patients receive;

• the drop-out or discontinuation rates of patients;

• potential additional safety monitoring or other studies requested by regulatory agencies;

• the duration of patient follow-up; and

• the efficacy and safety profile of the drug candidate.

We do not expect emricasan to be commercially available, if at all, for at least the next several years.

16

General and Administrative Expenses

General and administrative expenses consist principally of salaries and related costs for personnel in executive, finance, business development and administrative functions. Other general and administrative expenses include costs related to being a public company, as well as insurance, facilities, travel, patent filing and maintenance, legal and consulting expenses.

If emricasan receives regulatory approval, we expect to incur increased expenses associated with building a sales and marketing team. Some expenses may be incurred prior to receiving regulatory approval of emricasan. We do not expect to receive any such regulatory approval for at least the next several years.

Interest Income

Interest income consists primarily of interest income earned on our cash, cash equivalents and marketable securities.

Interest Expense

Interest expense consists of coupon interest on our $1.0 million promissory note payable to Pfizer Inc.

Other Income (Expense)

Other income (expense) includes non-operating transactions such as those caused by currency fluctuations in the conversion of account balances held in foreign currencies to U.S. dollars.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. 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. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ materially from these estimates under different assumptions or conditions.

There were no significant changes during the three months ended March 31, 2015 to the critical accounting policies described in “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 filed with the SEC on March 13, 2015.

Results of Operations

Comparison of the Three Months Ended March 31, 2015 and 2014

Research and Development Expenses

Research and development expenses were $3.9 million in the three months ended March 31, 2015, as compared to $3.7 million for the same period in 2014. The increase of $0.2 million was primarily due to an increase in external emricasan clinical trial costs and higher personnel costs, including noncash stock-based compensation expense, partially offset by a decrease in external emricasan manufacturing costs.

17

General and Administrative Expenses

General and administrative expenses were $2.1 million in the three months ended March 31, 2015, as compared to $1.6 million for the same period in 2014. The increase of $0.5 million was primarily due to higher personnel costs, including noncash stock-based compensation expense.

Changes in components of Other Income (Expense) were as follows:

Interest Income

Interest income was $11,000 for the three months ended March 31, 2015, as compared to $21,000 for the same period in 2014. Interest income consisted of interest earned on our cash, cash equivalents and marketable securities.

Interest Expense

Interest expense was $18,000 for each of the three-month periods ended March 31, 2015 and 2014 and consisted of interest related to the $1.0 million promissory note payable to Pfizer Inc.

Other Expense

Other expense was $9,000 for the three months ended March 31, 2015, as compared to $1,000 for the same period in 2014. Other expense represents currency fluctuations in the conversion of account balances held in foreign currencies to U.S. dollars.

Liquidity and Capital Resources

We have incurred losses since inception and negative cash flows from operating activities and, as of March 31, 2015, we had an accumulated deficit of $102.7 million. We anticipate that we will continue to incur net losses for the foreseeable future as we continue the development and potential commercialization of emricasan and incur additional costs associated with being a public company.

Prior to our IPO in July 2013, we funded our operations primarily through private placements of equity and convertible debt securities. In July 2013, we completed our IPO of 6,000,000 shares of common stock at an offering price of $11.00 per share. In April 2015, we completed a public offering of 4,025,000 shares of our common stock at a public offering price of $5.75 per share. We received net proceeds of approximately $58.6 million and $21.4 million, respectively, from these offerings, after deducting underwriting discounts and commissions and offering-related transaction costs. At March 31, 2015, we had cash, cash equivalents and marketable securities of approximately $31.0 million. We believe our existing cash, cash equivalents and marketable securities will be sufficient to fund our operations for at least the next 12 months. To fund further operations, we will need to raise additional capital. We plan to continue to fund losses from operations and capital funding needs through future equity and debt financing, as well as potential collaborations. The sale of additional equity or convertible debt could result in additional dilution to our stockholders. The incurrence of indebtedness would result in debt service obligations and could result in operating and financing covenants that would restrict our operations. No assurances can be provided that financing will be available in the amounts we need or on terms acceptable to us, if at all. If we are not able to secure adequate additional funding, we may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. Any of these actions could materially harm our business, results of operations and future prospects.

In August 2014, we entered into the Sales Agreement with MLV, pursuant to which we may sell from time to time, at our option, up to an aggregate of $50.0 million of shares of our common stock through MLV, as sales agent. Sales of our common stock made pursuant to the Sales Agreement, if any, will be made on The NASDAQ Global Market, or Nasdaq, under our Registration Statement on Form S-3 filed on August 14, 2014 by means of ordinary brokers’ transactions at market prices. Additionally, under the terms of the Sales Agreement, we may also sell shares of our common stock through MLV, on Nasdaq or otherwise, at negotiated prices or at prices related to the prevailing market price. Under the terms of the Sales Agreement, MLV may not engage in any proprietary trading or

18

trading as principal for MLV’s own account. MLV will use its commercially reasonable efforts consistent with its normal trading and sales practices to sell our common stock from time to time, based upon our instructions (including any price, time or size limits or other customary parameters or conditions we may impose). We cannot provide any assurances that we will issue any shares pursuant to the Sales Agreement. We will pay a commission rate equal to up to 3% of the gross sales price per share sold. We have also agreed to provide MLV with customary indemnification and contribution rights. The Sales Agreement may be terminated by us or MLV at any time upon ten days’ notice to the other party, or by MLV at any time in certain circumstances, including the occurrence of an event that would be reasonably likely to have a material adverse effect on our assets, business, operations, earnings, properties, condition (financial or otherwise), prospects, stockholders’ equity or results of operations. As of March 31, 2015, no shares were issued pursuant to the Sales Agreement.

The following table sets forth a summary of the net cash flow activity for each of the periods set forth below:

	Three Months Ended March 31,
	2015			2014
Net cash used in operating activities	$	(5,947,739	)	$	(5,061,125	)
Net cash provided by investing activities		4,366,639			3,375,834
Net cash (used in) provided by financing activities		(28,859	)		12,000
Net decrease in cash and cash equivalents	$	(1,609,959	)	$	(1,673,291	)

Net cash used in operating activities was $5.9 million and $5.1 million for the three months ended March 31, 2015 and 2014, respectively. The primary use of cash was to fund our operations related to the development of emricasan.

Net cash provided by investing activities was $4.4 million and $3.4 million for the three months ended March 31, 2015 and 2014, respectively, which consisted primarily of proceeds from maturities of marketable securities, partially offset by cash used to purchase marketable securities.

Net cash used in financing activities was $29,000 for the three months ended March 31, 2015, which consisted of deferred public offering costs related to the Sales Agreement and our public offering in April 2015 under our Registration Statement on Form S-3 filed in August 2014, partially offset by proceeds from the exercise of stock options. For the three months ended March 31, 2014, net cash provided by financing activities was $12,000 due to proceeds from the exercise of stock options.

Contractual Obligations and Commitments

As of March 31, 2015, there have been no other material changes outside the ordinary course of our business to the contractual obligations we reported in “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations and Commitments” in our annual report on Form 10-K for the year ended December 31, 2014 filed with the SEC on March 13, 2015.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements (as defined by applicable regulations of the SEC) that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of March 31, 2015, there have been no material changes in our market risk from that described in “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our annual report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission on March 13, 2015.

19

ITEM 4. CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this quarterly report on Form 10-Q. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of such date, our disclosure controls and procedures were effective.

Inherent Limitations of Disclosure Controls and Procedures and Internal Control Over Financial Reporting

Our management, including our principal executive officer and our principal financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended March 31, 2015, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

20

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are currently not a party to any material legal proceedings.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors included in “Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission on March 13, 2015.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

None.

Use of Proceeds

On July 24, 2013, our registration statement on Form S-1 (File No. 333-189305), which registered an aggregate amount of up to $69.0 million of our common stock, was declared effective by the Securities and Exchange Commission for our initial public offering, or IPO. On July 25, 2013, we filed a Registration Statement pursuant to Rule 462(b) (File No. 333-190115), which registered an additional aggregate amount of up to $6.9 million of our common stock. At the closing of our IPO on July 30, 2013, we sold 6,000,000 shares of common stock at an IPO price of $11.00 per share and received gross proceeds of $66.0 million, which resulted in net proceeds to us of approximately $58.6 million, after underwriting discounts and commissions of approximately $4.6 million and offering-related transaction costs of approximately $2.8 million. None of the expenses associated with our IPO were paid to directors, officers, persons owning ten percent or more of any class of equity securities, or to their associates, or to our affiliates. Stifel, Nicolaus & Company, Incorporated and Piper Jaffray & Co. acted as joint book-running managers, and JMP Securities LLC and SunTrust Robinson Humphrey, Inc. acted as co-managers for our IPO. On August 23, 2013, the underwriters’ 30-day over-allotment option to purchase an additional 900,000 shares of common stock in our IPO expired without being exercised and the IPO terminated.

We intend to use the net offering proceeds to fund the clinical development of emricasan and for working capital and general corporate purposes. Pending use of the net proceeds, we plan to invest the net proceeds from our IPO in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government. Through March 31, 2015, the net proceeds have been applied as follows: $14.9 million towards the clinical development of emricasan and $21.2 million towards working capital and general corporate purposes.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

21

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

A list of exhibits is set forth on the Exhibit Index immediately following the signature page of this quarterly report on Form 10-Q and is incorporated herein by reference.

22

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.

	CONATUS PHARMACEUTICALS INC.
Date: May 8, 2015	/s/ Steven J. Mento, Ph.D.
	Steven J. Mento, Ph.D.
	President and Chief Executive Officer
	(principal executive officer)
Date: May 8, 2015	/s/ Charles J. Cashion
	Charles J. Cashion
	Senior Vice President, Finance,
	Chief Financial Officer and Secretary
	(principal financial and accounting officer)

23

EXHIBIT INDEX

Exhibit Number	Description
3.1(1)	Amended and Restated Certificate of Incorporation
3.2(1)	Amended and Restated Bylaws
4.1(2)	Specimen Common Stock Certificate
4.2(3)	First Amended and Restated Investor Rights Agreement, dated February 9, 2011
4.3(3)	Form of Warrant issued to investors in the Registrant’s 2013 bridge financing
4.4(2)	Form of Warrant issued to lenders under the Loan and Security Agreement, dated as of July 3, 2013, by and among the Registrant, Oxford Finance LLC, Silicon Valley Bank and the other lenders party thereto
10.1#	Amended and Restated Annual Incentive Plan, dated January 1, 2015
31.1	Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated pursuant to the Securities Exchange Act of 1934, as amended
31.2	Certification of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 promulgated pursuant to the Securities Exchange Act of 1934, as amended
32.1*	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Chief 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 Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

(1) Incorporated by reference to the Registrant’s Current Report on Form 8-K, filed with the SEC on August 1, 2013.

(2) Incorporated by reference to Amendment No. 2 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-189305), filed with the SEC on July 8, 2013.

(3) Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (Registration No. 333- 189305), filed with the SEC on June 14, 2013.

# Indicates management contract or compensatory plan.

* These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

24

EX-10.1

Exhibit 10.1

CONATUS PHARMACEUTICALS INC.

ANNUAL INCENTIVE PLAN

(As Amended and Restated Effective January 1, 2015)

1. PURPOSE

This Conatus Pharmaceuticals Inc. Annual Incentive Plan (the “Plan”) is intended to provide an incentive for eligible employees of Conatus Pharmaceuticals Inc. (the “Company”) to perform to the best of their abilities, to further the growth, development and financial success of the Company, and to enable the Company to attract and retain highly qualified employees.

2. PARTICIPANTS

All employees of the Company and its subsidiaries meeting the eligibility requirements set forth in this Section 2 shall be eligible to receive a bonus award (an “Award”) hereunder (each such eligible employee, a “Participant”). To receive an Award under the Plan with respect to any Incentive Plan Year (as defined below), a Participant must:

(a) Be an “Active” employee as of the date of payment of his or her Award. For purposes of this Plan, “Active” shall mean an employee who is actively employed by the Company, including an employee on an approved leave of absence, such as medical, personal or military leave, but not an employee who has been moved to “inactive” status pursuant to the Company’s employee handbook.

(b) Be a “Regular Full-Time Employee” at the end of the relevant Incentive Plan Year. For purposes of this Plan, “Regular Full-Time Employee” shall mean an employee who is regularly scheduled to work at least 20 hours per week. The preceding hours requirement will be prorated for employees out on a medical leave of absence covered by the federal Family and Medical Leave Act or similar state law. Temporary or seasonal employees, interns, independent contractors and consultants are ineligible to participate in the Plan.

(c) Have been an eligible employee for at least two consecutive months prior to the end of the relevant Incentive Plan Year.

(d) Be an employee in good standing (e.g., not on a performance improvement plan) as of the last day of the Incentive Plan Year or the date the Awards are paid and performing at a minimum level of “Needs Improvement” or higher at the time his or her Award is paid.

(e) Not engage in and/or be involuntarily terminated as a result of serious misconduct (e.g., theft, dishonesty, workplace violence) or a violation of Company policy during the Incentive Plan Year or prior to the payment of his or her Award, as determined by the Company.

3. THE COMMITTEE

The Plan shall be administered by a committee (the “Committee”) of the Board of Directors of the Company (the “Board”), which shall be appointed by the Board. Initially, the Compensation Committee of the Board shall constitute the Committee. The Committee shall have the discretion and authority to administer and interpret the Plan, including the authority to establish one or more bonus programs under

1

the Plan from time to time containing such terms and conditions as the Committee may determine or deem appropriate in its discretion.

4. PERFORMANCE GOALS

The Plan is intended to provide incentive for the achievement of approved annual corporate and individual objectives (the “Performance Goals”) with respect to each calendar year during the term of the Plan (each an “Incentive Plan Year”).

(a) Corporate Performance Goals. Prior to or at the beginning of each Incentive Plan Year, the Committee shall select such objective corporate Performance Goals for such Incentive Plan Year as the Committee may determine in its sole discretion. It is intended that the corporate Performance Goals be objectively determinable and based upon financial metrics set forth in the Company’s annual business plan or strategic objectives consistent with the Company’s annual business plan, with the weighting of the various objectives to be approved by the Committee.

(b) Individual Performance Goals. All Participants in the Plan will work with their managers to develop a list of key individual Performance Goals, which individual Performance Goals will be subject to the approval of each Participant’s manager. The individual Performance Goals for the executive officers of the Company, if applicable, will be approved by the Chief Executive Officer of the Company.

5. TARGET AWARD PERCENTAGES

Each Participant will be assigned a “Target Award Percentage” based on his or her job classification and responsibilities. A Participant’s Target Award Percentage for any given Incentive Plan Year will be based on his or her job classification as of December 31 of such Incentive Plan Year. The Target Award Percentages will be reviewed annually by the Committee and adjusted as necessary or appropriate. The initial Target Award Percentages for purposes of the Plan will be as follows:

Position	Target Award Percentage (% of base salary)
Chief Executive Officer		50	%
Executive Vice President		40	%
Senior Vice President		35	%
Vice President		30	%
Senior Director		20	%
Director		15	%
Manager		10	%
Professional		7.5	%
Clerical		5	%

A “Target Award” for each Participant for each Incentive Plan Year will be determined by multiplying his or her “Target Award Percentage” by his or her base salary as of December 31 of such Incentive Plan Year.

6. WEIGHTINGS

Other than the Chief Executive Officer of the Company, whose Award will be determined solely by reference to corporate Performance Goal achievement as set forth below, a portion of each Participant’s Award will be based on corporate Performance Goal achievement and a portion will be based on individual Performance Goal achievement. The relative weight between these goals will vary based on levels within

2

the organization. The weighting will be reviewed annually by the Committee and be adjusted, as necessary or appropriate.

The initial weightings for purposes of the Plan will be as follows:

	Corporate			Individual
Chief Executive Officer		100	%		0	%
Executive/Senior Vice President		80	%		20	%
Vice President		70	%		30	%
Senior Director/Director		60	%		40	%
All other employees		50	%		50	%

7. PERFORMANCE MEASUREMENT

Separate “Performance Factors” will be established for each of the corporate and individual Performance Goals applicable to each Award for each Incentive Plan Year.

(a) Corporate Performance Factor. The Chief Executive Officer of the Company will present to the Committee for its approval his assessment of the level of the Company’s achievement of its corporate Performance Goals, in the Committee’s sole discretion. The corporate “Performance Factor” shall be expressed as a percentage within the range specified by the Committee with respect to each Incentive Plan Year, which percentage may exceed 100%. The same corporate “Performance Factor,” as approved by the Committee, shall be used for the corporate component of each Participant’s Award.

(b) Individual Performance Factor. A Participant’s achievement level relative to his or her individual Performance Goals will be used to calculate a Performance Factor for such Participant, which shall be expressed as a percentage within the range specified by the Committee or its designee with respect to each Incentive Plan Year, which percentage may exceed 100%. While a Participant’s direct manager shall take a Participant’s achievement with respect to his or her individual Performance Goals for the Incentive Plan Year into account in determining the individual Performance Factor, any such determination remains in the sole discretion of the direct manager based on their subjective assessment of a Participant’s overall performance. The proposed individual Performance Factors for the executive officers of the Company will be presented by the Chief Executive Officer of the Company to the Committee for its approval, which shall retain the sole discretion to determine such executives’ individual Performance Factors based on its subjective assessment of each executive’s overall performance.

(c) Performance Measurement. Unless otherwise determined by the Committee, the corporate Performance Factor and each individual Performance Factor will be within the following ranges:

	Performance Category	Performance Factor
1.	Performance for the year was outstanding and exceeded objectives (EC rating)	100% to 150%
2.	Performance for the year met or exceeded objectives or was excellent in view of prevailing conditions (EE rating)	75% to 100%

3

3.	Performance generally met the year’s objectives or was very acceptable in view of prevailing conditions (ME rating)	25% to 75%
4.	Performance for the year met some but not all objectives (BE rating)	1% to 25%
5.	The goal was not achieved and performance was not acceptable in view of prevailing conditions	0%

Unless otherwise determined by the Committee, each goal will be evaluated separately, the appropriate weighting applied and a total Performance Factor determined.

8. AWARD CALCULATIONS

The actual Award for a Participant will be calculated by allocating the Target Award for such Participant between the corporate and individual weightings for the relevant Incentive Plan Year, and then applying the corresponding corporate and individual Performance Factors to each such amount, respectively.

The example below shows a sample Award calculation under the Plan. First, a total Target Award is calculated by multiplying the Plan Participant’s base salary by the Target Award Percentage. The resulting amount is then divided into its corporate component and its individual component, if any, based on the relative weightings for that Participant’s specific position. This calculation establishes specific dollar Target Award for the Plan year for each component of the Award.

Example:	Position:		Vice President
	Base Salary:	$	200,000
	Target Award Percentage:		25	%
	Target Award (in dollars):	$	50,000
	Assumed Performance Factors based on the following assessment of corporate and individual performance:
	Corporate Performance Factor		90	%
	Individual Performance Factor		100	%
	Award Calculation:
	Target Award components (based on weightings):
	Corporate performance (70%):	$	35,000
	Individual performance (30%):	$	15,000
	Corporate component	$	31,500		($35,000 x 90%)
	Individual component	$	15,000		($15,000 x 100%)
Total Award:		$	46,500		(93% of Target Award)

Award calculations will be based on a Participant’s base salary as of the last day of the applicable Incentive Plan Year.

4

A Participant who has been an eligible employee for less than a year, but who is an eligible employee for at least two months prior to the end of an Incentive Plan Year and remains continuously employed through the end of such Incentive Plan Year, will receive a pro-rata Award based on the portion of the Incentive Plan Year he or she was an eligible employee. Award payments may also be prorated for any time during an Incentive Plan Year an otherwise eligible employee was not classified as an Active employee or Regular Full-Time Employee during such Incentive Plan Year, in the discretion of the Committee. Other than as stated above, Awards will not be prorated for partial year service.

The Committee may, in its discretion, reduce or eliminate an Award otherwise payable to any Participant. Any such reduction or elimination may be made based on such objective or subjective determinations as the Committee determines appropriate.

9. PAYMENT OF AWARDS

The payment of Awards under the Plan shall be made on any date or dates determined by the Committee during the calendar year following the Incentive Plan Year to which such Awards relate and shall be subject to such terms and conditions as may be determined by the Committee in its sole discretion. As provided in Section 2, a Participant must be an Active employee of the Company or its subsidiaries and in good standing as of the date on which the Award is paid in order to be entitled to receive such Award. If a Participant dies or a Participant’s employment is terminated for any reason prior to the payment of his or her Award, the payment of any Award (and in the case of death, the person or persons to whom such payment shall be made) shall be determined at the sole discretion of the Committee.

Any Award that becomes payable under the Plan may be paid in the form of cash, shares of the Company’s common stock or a combination of both, as determined by the Committee in its sole discretion. To the extent that the Committee determines to pay an Award in the form of shares of the Company’s common stock, such shares shall be awarded under the Company’s 2013 Incentive Award Plan, as amended from time to time, and shall be subject to the terms and conditions thereof.

10. AMENDMENT, SUSPENSION AND TERMINATION

The Company may amend, suspend or terminate the Plan at any time in its sole discretion. Such discretion may be exercised any time before, during, and after the Plan year is completed. In the event of the Plan’s termination prior to the payment of an Award, such Award will not be payable under this Plan. Such discretion may be exercised any time before, during and after the Incentive Plan Year is completed. No Participant shall have any vested right to receive any payment until actual delivery of such compensation. This Plan shall supersede and replace the Company’s Employee Incentive Compensation Plan.

11. MISCELLANEOUS

(a) The Company shall deduct all federal, state, and local taxes required by law or Company policy from any Award paid hereunder.

(b) In no event shall the Company be obligated to pay to any Participant an Award for any period by reason of the Company’s payment of an Award to such Participant in any other period, or by reason of the Company’s payment of an Award to any other Participant or Participants in such period or in any other period.

5

(c) This Plan does not, and Company policies and practices in administering this Plan do not, constitute an express or implied contract or other agreement concerning the payment of any Award or the duration of any Participant’s employment with the Company. The employment relationship of each Participant is “at will” and may be terminated at any time by the Company or by the Participant, with or without cause.

(d) The Plan shall be unfunded. Amounts payable under the Plan are not and will not be transferred into a trust or otherwise set aside. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Award under the Plan. Any accounts under the Plan are for bookkeeping purposes only and do not represent a claim against the specific assets of the Company.

(e) No rights of any Participant to payments of any amounts under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated. All rights with respect to an Award granted to a Participant under the Plan shall be available during his or her lifetime only to the Participant.

(f) Any provision of the Plan that is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of the Plan.

(g) The Plan shall be construed, interpreted and the rights of the parties determined in accordance with the laws of the State of California (without regard to principles of conflicts of law).

6

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

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

I, Steven J. Mento, Ph.D., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Conatus Pharmaceuticals Inc.;

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

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

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and 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(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

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

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

Date: May 8, 2015	/s/ Steven J. Mento, Ph.D.
	Steven J. Mento, Ph.D.
	President and Chief Executive Officer
	(principal executive officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

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

I, Charles J. Cashion, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Conatus Pharmaceuticals Inc.;

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

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

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and 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(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

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

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

Date: May 8, 2015	/s/ Charles J. Cashion
	Charles J. Cashion
	Senior Vice President, Finance,
	Chief Financial Officer and Secretary (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 Conatus Pharmaceuticals Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven J. Mento, Ph.D., President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; 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 8, 2015	/s/ Steven J. Mento, Ph.D.
	Steven J. Mento, Ph.D.
	President and Chief Executive Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

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 Conatus Pharmaceuticals Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Charles J. Cashion, Senior Vice President, Finance, Chief Financial Officer and Secretary of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; 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 8, 2015	/s/ Charles J. Cashion
	Charles J. Cashion
	Senior Vice President, Finance,
	Chief Financial Officer and Secretary

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

XML

Property and Equipment - Schedule of Property and Equipment (Detail) (USD $)	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 464,242	$ 464,242
Less accumulated depreciation and amortization	(244,272)	(227,176)
Property and equipment, net	219,970	237,066
Furniture and fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, Useful Life	4 years
Property and equipment, gross	239,788	239,788
Computer equipment and office equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, Useful Life	4 years
Property and equipment, gross	162,921	162,921
Leasehold improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, Useful Life	5 years
Property and equipment, gross	$ 61,533	$ 61,533

XML

Marketable Securities

3 Months Ended

Mar. 31, 2015

Investments, Debt and Equity Securities [Abstract]

Marketable Securities

4. Marketable Securities

The Company invests its excess cash in money market funds and debt instruments of financial institutions, corporations, government sponsored entities and municipalities. The following tables summarize the Company’s marketable securities:

As of March 31, 2015	Maturity (in years)		Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Corporate debt securities		1 or less	$	22,703,155	$	2,675	$	(5,214	)	$	22,700,616
Total			$	22,703,155	$	2,675	$	(5,214	)	$	22,700,616
As of December 31, 2014	Maturity (in years)		Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Corporate debt securities		1 or less	$	25,795,008	$	1,137	$	(9,223	)	$	25,786,922
Corporate debt securities		1 - 2		1,307,561		—		(5,211	)		1,302,350
Municipal bonds		1 or less		70,000		—		—			70,000
Total			$	27,172,569	$	1,137	$	(14,434	)	$	27,159,272

XML

Stockholders' Equity - Summary of Common Stock Reserved for Future Issuance (Detail)	Mar. 31, 2015
Equity [Abstract]
Common stock warrants	149,704
Stock options issued and outstanding	2,370,073
Authorized for future option grants	661,038
Authorized for the ESPP	450,000
Shares of common stock are reserved for future issuance	3,630,815

XML

Stockholders' Equity - Summary of Stock Option Activity (Detail) (USD $)	3 Months Ended
	Mar. 31, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Total Options, Beginning balance	1,859,034
Total Options, Granted	552,250
Total Options, Exercised	(19,211)
Total Options, Cancelled	(22,000)
Total Options, Ending balance	2,370,073
Weighted-Average Exercise Price, Beginning balance	$ 6.84
Weighted-Average Exercise Price, Granted	$ 6.43
Weighted-Average Exercise Price, Exercised	$ 1.02
Weighted-Average Exercise Price, Cancelled	$ 8.32
Weighted-Average Exercise Price, Ending balance	$ 6.78

XML

Commitments - Additional Information (Detail) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Jul. 31, 2010
Operating Leased Assets [Line Items]
Rent expense	$ 71,130	$ 44,883
Stock purchase agreement, amount payable upon the achievement of specified regulatory milestone			18,000,000
Operating lease term July 2014 through November 2019 [Member]
Operating Leased Assets [Line Items]
Future minimum payments for noncancelable operating lease	$ 1,400,000
Lease renewal term	5 years

XML

Fair Value Measurements

3 Months Ended

Mar. 31, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1:	Includes financial instruments for which quoted market prices for identical instruments are available in active markets.
Level 2:	Includes financial instruments for which there are inputs other than quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets with insufficient volume or infrequent transaction (less active markets) or model-driven valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3:	Includes financial instruments for which fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including management’s own assumptions.

Below is a summary of assets and liabilities measured at fair value as of March 31, 2015 and December 31, 2014.

			Fair Value Measurements Using
	March 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	$	6,671,248	$	6,671,248	$	—	$	—
Corporate debt securities		22,700,616		—		22,700,616		—
Total assets	$	29,371,864	$	6,671,248		22,700,616	$	—

			Fair Value Measurements Using
	December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Money market funds	$	6,998,111	$	6,998,111	$	—	$	—
Municipal bonds		70,000		—		70,000		—
Corporate debt securities		28,589,331		—		28,589,331		—
Total assets	$	35,657,442	$	6,998,111	$	28,659,331	$	—

The Company’s marketable securities, consisting principally of debt securities, are classified as available-for-sale, are stated at fair value, and consist of Level 2 financial instruments in the fair value hierarchy. The Company determines the fair value of its debt security holdings based on pricing from a service provider. The service provider values the securities based on using market prices from a variety of industry-standard independent data providers. Such market prices may be quoted prices in active markets for identical assets (Level 1 inputs) or pricing determined using inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs), such as yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures.

XML

Condensed Balance Sheets (USD $)	Mar. 31, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 8,302,715	$ 9,912,674
Marketable securities	22,700,616	27,159,272
Prepaid and other current assets	541,111	796,818
Total current assets	31,544,442	37,868,764
Property and equipment, net	219,970	237,066
Other assets	558,704	342,051
Total assets	32,323,116	38,447,881
Current liabilities:
Accounts payable and accrued expenses	2,249,497	3,003,612
Accrued compensation	875,533	1,171,621
Total current liabilities	3,125,030	4,175,233
Note payable	1,000,000	1,000,000
Deferred rent	93,994	58,699
Stockholders' equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding	0	0
Common stock, $0.0001 par value; 200,000,000 shares authorized; 15,712,407 shares issued and 15,609,230 shares outstanding, excluding 103,177 shares subject to repurchase, at March 31, 2015; 15,695,834 shares issued and 15,560,614 shares outstanding, excluding 135,220 shares subject to repurchase, at December 31, 2014	1,561	1,556
Additional paid-in capital	130,835,119	129,976,075
Accumulated other comprehensive loss	(2,539)	(13,297)
Accumulated deficit	(102,730,049)	(96,750,385)
Total stockholders' equity	28,104,092	33,213,949
Total liabilities and stockholders' equity	$ 32,323,116	$ 38,447,881

XML

Organization and Basis of Presentation

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Organization and Basis of Presentation

1. Organization and Basis of Presentation

Conatus Pharmaceuticals Inc. (the Company) was incorporated in the state of Delaware on July 13, 2005. The Company is a biotechnology company focused on the development and commercialization of novel medicines to treat liver disease.

As of March 31, 2015, the Company has devoted substantially all of its efforts to product development and has not realized revenues from its planned principal operations.

The Company has a limited operating history, and the sales and income potential of the Company’s business and market are unproven. The Company has experienced net losses since its inception and, as of March 31, 2015, had an accumulated deficit of $102.7 million. The Company expects to continue to incur net losses for at least the next several years. Successful transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support the Company’s cost structure. If the Company is unable to generate revenues adequate to support its cost structure, the Company may need to raise additional equity or debt financing.

The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and the rules and regulations of the Securities and Exchange Commission (SEC) related to a quarterly report on Form 10-Q. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. The unaudited interim condensed financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. All such adjustments are of a normal and recurring nature. The operating results presented in these unaudited interim condensed financial statements are not necessarily indicative of the results that may be expected for any future periods. These unaudited interim condensed financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2014 included in the Company’s annual report on Form 10-K filed with the SEC on March 13, 2015.

XML

Summary of Significant Accounting Policies - Summary of Outstanding Potentially Dilutive Securities Excluded in Calculation of Diluted Net Loss Per Share (Detail)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Outstanding potentially dilutive securities	2,628,108	1,973,103
Warrants to purchase common stock [Member] | Common Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Outstanding potentially dilutive securities	149,704	149,704
Common stock options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Outstanding potentially dilutive securities	2,370,073	1,615,719
ESPP shares pending issuance [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Outstanding potentially dilutive securities	5,154
Common stock subject to repurchase [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Outstanding potentially dilutive securities	103,177	207,680

XML

Marketable Securities - Summary of Marketable Securities (Detail) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 22,703,155	$ 27,172,569
Unrealized Gains	2,675	1,137
Unrealized Losses	(5,214)	(14,434)
Estimated Fair Value	22,700,616	27,159,272
Corporate debt securities [Member] | 1 or less years of maturity [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	22,703,155	25,795,008
Unrealized Gains	2,675	1,137
Unrealized Losses	(5,214)	(9,223)
Estimated Fair Value	22,700,616	25,786,922
Corporate debt securities [Member] | 1 - 2 years of maturity [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		1,307,561
Unrealized Losses		(5,211)
Estimated Fair Value		1,302,350
Municipal bonds [Member] | 1 or less years of maturity [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		70,000
Estimated Fair Value		$ 70,000

XML

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash. Additionally, the Company established guidelines regarding approved investments and maturities of investments, which are designed to maintain safety and liquidity.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity from the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include cash in readily available checking and money market accounts.

Marketable Securities

The Company classifies its marketable securities as available-for-sale and records such assets at estimated fair value in the condensed balance sheets, with unrealized gains and losses, if any, reported as a component of other comprehensive income (loss) within the condensed statements of operations and comprehensive loss and as a separate component of stockholders’ equity. The Company classifies marketable securities with remaining maturities greater than one year as current assets because such marketable securities are available to fund the Company’s current operations. The Company invests its excess cash balances primarily in corporate debt securities and money market funds with strong credit ratings. Realized gains and losses are calculated on the specific identification method and recorded as interest income. There were no realized gains and losses for the three-month periods ended March 31, 2015 and 2014.

At each balance sheet date, the Company assesses available-for-sale securities in an unrealized loss position to determine whether the unrealized loss is other-than-temporary. The Company considers factors including: the significance of the decline in value compared to the cost basis, underlying factors contributing to a decline in the prices of securities in a single asset class, the length of time the market value of the security has been less than its cost basis, the security’s relative performance versus its peers, sector or asset class, expected market volatility and the market and economy in general. When the Company determines that a decline in the fair value below its cost basis is other-than-temporary, the Company recognizes an impairment loss in the period in which the other-than-temporary decline occurred. There have been no other-than-temporary declines in the value of marketable securities, as it is more likely than not the Company will hold the securities until maturity or a recovery of the cost basis.

Fair Value of Financial Instruments

The carrying amounts of prepaid and other current assets, accounts payable and accrued expenses are reasonable estimates of their fair value because of the short maturity of these items.

Stock-Based Compensation

Stock-based compensation expense for stock option grants under the Company’s stock option plans is recorded at the estimated fair value of the award as of the grant date and is recognized as expense on a straight-line basis over the requisite service period of the stock-based award. Stock-based compensation expense for employee stock purchases under the Company’s 2013 Employee Stock Purchase Plan (the ESPP) is recorded at the estimated fair value of the purchase as of the plan enrollment date and is recognized as expense on a straight-line basis over the applicable six-month ESPP offering period. The estimation of stock option and employee stock purchase plan fair value requires management to make estimates and judgments about, among other things, employee exercise behavior, forfeiture rates and volatility of the Company’s common stock. The judgments directly affect the amount of compensation expense that will be recognized.

Property and Equipment

Property and equipment, which consists of furniture and fixtures, computers and office equipment and leasehold improvements, are stated at cost and depreciated over the estimated useful lives of the assets (three to five years) using the straight-line method. Leasehold improvements are amortized over the shorter of their estimated useful lives or the lease term.

Long-Lived Assets

The Company regularly reviews the carrying value and estimated lives of all of its long-lived assets, including property and equipment, to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives. The determinants used for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods, as well as the strategic significance of the assets to the Company’s business objective. Should an impairment exist, the impairment loss would be measured based on the excess of the carrying amount of the asset’s fair value. The Company has not recognized any impairment losses through March 31, 2015.

Research and Development Expenses

All research and development costs are expensed as incurred.

Income Taxes

The Company’s policy related to accounting for uncertainty in income taxes prescribes a recognition threshold and measurement attribute criteria for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. As of December 31, 2014, there are no unrecognized tax benefits included in the condensed balance sheet that would, if recognized, affect the Company’s effective tax rate, and the Company has noted no material changes through March 31, 2015. The Company has not recognized interest and penalties in the condensed balance sheets or condensed statements of operations and comprehensive loss. The Company is subject to U.S. and California taxation. As of December 31, 2014, the Company’s tax years beginning 2005 to date are subject to examination by taxing authorities.

Comprehensive Loss

The Company is required to report all components of comprehensive loss, including net loss, in the condensed financial statements in the period in which they are recognized. Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from nonowner sources, including unrealized gains and losses on marketable securities. Comprehensive gains (losses) have been reflected in the condensed statements of operations and comprehensive loss for all periods presented.

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is used in making decisions regarding resource allocation and assessing performance. To date, the Company has viewed its operations and managed its business as one segment operating primarily in the United States.

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. The Company’s potentially dilutive securities, which include warrants, outstanding stock options under the Company’s stock option plans, common stock subject to repurchase by the Company and potential shares to be purchased under the ESPP, have been excluded from the computation of diluted net loss per share in the periods in which they would be anti-dilutive. For all periods presented, there is no difference in the number of shares used to compute basic and diluted shares outstanding due to the Company’s net loss position.

The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because to do so would be anti-dilutive:

	March 31,
	2015		2014
Warrants to purchase common stock		149,704		149,704
Common stock options		2,370,073		1,615,719
Common stock subject to repurchase		103,177		207,680
ESPP shares pending issuance		5,154		—
Total		2,628,108		1,973,103

Recent Accounting Pronouncements

In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This guidance requires management to perform interim and annual assessments on whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year of the date the financial statements are issued. If such conditions or events exist, certain disclosures are required. ASU No. 2014-15 is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the impact of the pending adoption of ASU No. 2014-15 on its financial statements and related disclosures.

XML

Condensed Balance Sheets (Parenthetical) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	15,712,407	15,695,834
Common stock, shares outstanding	15,609,230	15,560,614
Common stock, shares subject to repurchase	103,177	135,220

XML

Marketable Securities (Tables)

3 Months Ended

Mar. 31, 2015

Investments, Debt and Equity Securities [Abstract]

Summary of Marketable Securities

The Company invests its excess cash in money market funds and debt instruments of financial institutions, corporations, government sponsored entities and municipalities. The following tables summarize the Company’s marketable securities:

As of March 31, 2015	Maturity (in years)		Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Corporate debt securities		1 or less	$	22,703,155	$	2,675	$	(5,214	)	$	22,700,616
Total			$	22,703,155	$	2,675	$	(5,214	)	$	22,700,616
As of December 31, 2014	Maturity (in years)		Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Corporate debt securities		1 or less	$	25,795,008	$	1,137	$	(9,223	)	$	25,786,922
Corporate debt securities		1 - 2		1,307,561		—		(5,211	)		1,302,350
Municipal bonds		1 or less		70,000		—		—			70,000
Total			$	27,172,569	$	1,137	$	(14,434	)	$	27,159,272

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2015	May 01, 2015
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1
Trading Symbol	CNAT
Entity Registrant Name	Conatus Pharmaceuticals Inc.
Entity Central Index Key	0001383701
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		19,737,407

XML

Property and Equipment (Tables)

3 Months Ended

Mar. 31, 2015

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment

Property and equipment consist of the following:

	Useful Life in Years	March 31, 2015			December 31, 2014
Furniture and fixtures	4	$	239,788		$	239,788
Computer equipment and office equipment	4		162,921			162,921
Leasehold improvements	5		61,533			61,533
			464,242			464,242
Less accumulated depreciation and amortization			(244,272	)		(227,176	)
		$	219,970		$	237,066

XML

Condensed Statements of Operations and Comprehensive Loss (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Operating expenses:
Research and development	$ 3,883,613	$ 3,650,598
General and administrative	2,081,309	1,595,247
Total operating expenses	5,964,922	5,245,845
Other income (expense):
Interest income	11,419	20,773
Interest expense	(17,500)	(17,500)
Other expense	(8,661)	(784)
Total other (expense) income	(14,742)	2,489
Net loss	(5,979,664)	(5,243,356)
Other comprehensive income (loss):
Net unrealized gains (losses) on marketable securities	10,758	(13,371)
Comprehensive loss	$ (5,968,906)	$ (5,256,727)
Net loss per share, basic and diluted	$ (0.38)	$ (0.34)
Weighted average shares outstanding used in computing net loss per share, basic and diluted	15,581,886	15,412,498

XML

Stockholders' Equity

3 Months Ended

Mar. 31, 2015

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

Stockholders' Equity

7. Stockholders’ Equity

Common Stock

In July 2013, the Company completed the IPO of 6,000,000 shares of common stock at an offering price of $11.00 per share. The Company received net proceeds of approximately $58.6 million, after deducting underwriting discounts and commissions and offering-related transaction costs.

On August 14, 2014, the Company entered into an At Market Issuance Sales Agreement (the Sales Agreement) with MLV & Co. LLC (MLV), pursuant to which the Company may sell from time to time, at its option, up to an aggregate of $50.0 million of shares of its common stock through MLV, as sales agent. Sales of the Company’s common stock made pursuant to the Sales Agreement, if any, will be made on The NASDAQ Global Market (Nasdaq) by means of ordinary brokers’ transactions at market prices. Additionally, under the terms of the Sales Agreement, the Company may also sell shares of its common stock through MLV, on Nasdaq or otherwise, at negotiated prices or at prices related to the prevailing market price. Under the terms of the Sales Agreement, MLV may not engage in any proprietary trading or trading as principal for MLV’s own account. MLV has agreed to use commercially reasonable efforts consistent with its normal trading and sales practices to sell the Company’s common stock from time to time, based upon the Company’s instructions (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company cannot provide any assurances that it will issue any shares pursuant to the Sales Agreement. The Company has agreed to pay a commission rate equal to up to 3% of the gross sales price per share sold. The Company has also agreed to provide MLV with customary indemnification and contribution rights. The Company has incurred legal and accounting costs of approximately $0.3 million, as of March 31, 2015, in connection with the commencement of the Sales Agreement, which are recorded in other assets on the balance sheet until such time as the Company issues shares pursuant to the Sales Agreement. As of March 31, 2015, no shares were issued pursuant to the Sales Agreement.

In April 2015, the Company completed a public offering of 4,025,000 shares of its common stock at a public offering price of $5.75 per share. The shares were registered pursuant to a registration statement on Form S-3 filed on August 14, 2014. The Company received net proceeds of approximately $21.4 million, after deducting underwriting discounts and commissions and estimated offering-related transaction costs. The Company has incurred legal and accounting costs of approximately $0.2 million, as of March 31, 2015, in connection with this public offering, including certain costs associated with the preparation of the related registration statement on Form S-3, which are recorded in other assets on the balance sheet.

Warrants

In 2013, the Company issued warrants exercisable for 1,124,026 shares of Series B preferred stock, at an exercise price of $0.90 per share, to certain existing investors in conjunction with a private placement (the 2013 Warrants) and warrants exercisable for 111,112 shares of Series B preferred stock, at an exercise price of $0.90 per shares, to Oxford Finance LLC and Silicon Valley Bank in conjunction with a loan and security agreement (the Lender Warrants). Upon completion of the IPO, the 2013 Warrants and the Lender Warrants became exercisable for 136,236 and 13,468 shares of common stock, respectively, at an exercise price of $7.43 per share. The 2013 Warrants and the Lender Warrants will expire on May 30, 2018 and July 3, 2023, respectively.

Stock Options

The following table summarizes the Company’s stock option activity under all stock option plans for the three months ended March 31, 2015:

	Total Options			Weighted- Average Exercise Price
Balance at December 31, 2014		1,859,034		$	6.84
Granted		552,250			6.43
Exercised		(19,211	)		1.02
Cancelled		(22,000	)		8.32
Balance at March 31, 2015		2,370,073		$	6.78

Stock-Based Compensation

The Company recorded stock-based compensation of $821,672 and $379,433 for the three months ended March 31, 2015 and 2014, respectively.

Common Stock Reserved for Future Issuance

The following shares of common stock are reserved for future issuance at March 31, 2015:

Common stock warrants	149,704
Stock options issued and outstanding	2,370,073
Authorized for future option grants	661,038
Authorized for the ESPP	450,000
	3,630,815

XML

Note Payable

3 Months Ended

Mar. 31, 2015

Debt Disclosure [Abstract]

Note Payable

6. Note Payable

In July 2010, the Company entered into a $1.0 million promissory note payable to Pfizer Inc. (Pfizer). The note bears interest at 7% per annum, which is paid quarterly, and matures on July 29, 2020. The note payable prohibits the Company from paying cash dividends and is subject to acceleration upon specified events of default as defined in the agreement, including the failure to notify Pfizer of certain material adverse events. In July 2013, the note payable to Pfizer was amended to become convertible into shares of the Company’s common stock following the completion of the Company’s initial public offering (IPO), at the option of the holder, at a price per share equal to the fair market value of the common stock on the date of conversion.

XML

Fair Value Measurements - Summary of Assets and Liabilities Measured at Fair Value (Detail) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value	$ 29,371,864	$ 35,657,442
Money market funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value	6,671,248	6,998,111
Municipal bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value		70,000
Corporate debt securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value	22,700,616	28,589,331
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value	6,671,248	6,998,111
Level 1 [Member] | Money market funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value	6,671,248	6,998,111
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value	22,700,616	28,659,331
Level 2 [Member] | Municipal bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value		70,000
Level 2 [Member] | Corporate debt securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value	$ 22,700,616	$ 28,589,331

XML

Stockholders' Equity (Tables)

3 Months Ended

Mar. 31, 2015

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

Summary of Stock Option Activity

The following table summarizes the Company’s stock option activity under all stock option plans for the three months ended March 31, 2015:

	Total Options			Weighted- Average Exercise Price
Balance at December 31, 2014		1,859,034		$	6.84
Granted		552,250			6.43
Exercised		(19,211	)		1.02
Cancelled		(22,000	)		8.32
Balance at March 31, 2015		2,370,073		$	6.78

Summary of Common Stock Reserved for Future Issuance

The following shares of common stock are reserved for future issuance at March 31, 2015:

Common stock warrants	149,704
Stock options issued and outstanding	2,370,073
Authorized for future option grants	661,038
Authorized for the ESPP	450,000
	3,630,815

XML

Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Summary of Outstanding Potentially Dilutive Securities Excluded in Calculation of Diluted Net Loss Per Share

The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because to do so would be anti-dilutive:

	March 31,
	2015		2014
Warrants to purchase common stock		149,704		149,704
Common stock options		2,370,073		1,615,719
Common stock subject to repurchase		103,177		207,680
ESPP shares pending issuance		5,154		—
Total		2,628,108		1,973,103

XML

Commitments

3 Months Ended

Mar. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments

8. Commitments

In February 2014, the Company entered into a noncancelable operating lease for certain office space starting in July 2014 through December 2019 with a renewal option for an additional five years. Future minimum payments under this noncancelable operating lease total approximately $1.4 million at March 31, 2015.

Rent expense was $71,130 and $44,883 for the three months ended March 31, 2015 and 2014, respectively.

In July 2010, the Company entered into a stock purchase agreement with Pfizer, pursuant to which the Company acquired all of the outstanding stock of Idun Pharmaceuticals, Inc., which was subsequently spun off to the Company’s stockholders in January 2013. Under the agreement, the Company may be required to make payments to Pfizer totaling $18.0 million upon the achievement of specified regulatory milestones.

XML

Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates

The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Concentrations of Credit Risk

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash. Additionally, the Company established guidelines regarding approved investments and maturities of investments, which are designed to maintain safety and liquidity.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity from the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include cash in readily available checking and money market accounts.

Marketable Securities

Marketable Securities

The Company classifies its marketable securities as available-for-sale and records such assets at estimated fair value in the condensed balance sheets, with unrealized gains and losses, if any, reported as a component of other comprehensive income (loss) within the condensed statements of operations and comprehensive loss and as a separate component of stockholders’ equity. The Company classifies marketable securities with remaining maturities greater than one year as current assets because such marketable securities are available to fund the Company’s current operations. The Company invests its excess cash balances primarily in corporate debt securities and money market funds with strong credit ratings. Realized gains and losses are calculated on the specific identification method and recorded as interest income. There were no realized gains and losses for the three-month periods ended March 31, 2015 and 2014.

At each balance sheet date, the Company assesses available-for-sale securities in an unrealized loss position to determine whether the unrealized loss is other-than-temporary. The Company considers factors including: the significance of the decline in value compared to the cost basis, underlying factors contributing to a decline in the prices of securities in a single asset class, the length of time the market value of the security has been less than its cost basis, the security’s relative performance versus its peers, sector or asset class, expected market volatility and the market and economy in general. When the Company determines that a decline in the fair value below its cost basis is other-than-temporary, the Company recognizes an impairment loss in the period in which the other-than-temporary decline occurred. There have been no other-than-temporary declines in the value of marketable securities, as it is more likely than not the Company will hold the securities until maturity or a recovery of the cost basis.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying amounts of prepaid and other current assets, accounts payable and accrued expenses are reasonable estimates of their fair value because of the short maturity of these items.

Stock-Based Compensation

Stock-Based Compensation

Stock-based compensation expense for stock option grants under the Company’s stock option plans is recorded at the estimated fair value of the award as of the grant date and is recognized as expense on a straight-line basis over the requisite service period of the stock-based award. Stock-based compensation expense for employee stock purchases under the Company’s 2013 Employee Stock Purchase Plan (the ESPP) is recorded at the estimated fair value of the purchase as of the plan enrollment date and is recognized as expense on a straight-line basis over the applicable six-month ESPP offering period. The estimation of stock option and employee stock purchase plan fair value requires management to make estimates and judgments about, among other things, employee exercise behavior, forfeiture rates and volatility of the Company’s common stock. The judgments directly affect the amount of compensation expense that will be recognized.

Property and Equipment

Property and Equipment

Property and equipment, which consists of furniture and fixtures, computers and office equipment and leasehold improvements, are stated at cost and depreciated over the estimated useful lives of the assets (three to five years) using the straight-line method. Leasehold improvements are amortized over the shorter of their estimated useful lives or the lease term.

Long-Lived Assets

Long-Lived Assets

The Company regularly reviews the carrying value and estimated lives of all of its long-lived assets, including property and equipment, to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives. The determinants used for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods, as well as the strategic significance of the assets to the Company’s business objective. Should an impairment exist, the impairment loss would be measured based on the excess of the carrying amount of the asset’s fair value. The Company has not recognized any impairment losses through March 31, 2015.

Research and Development Expenses

Research and Development Expenses

All research and development costs are expensed as incurred.

Income Taxes

Income Taxes

The Company’s policy related to accounting for uncertainty in income taxes prescribes a recognition threshold and measurement attribute criteria for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. As of December 31, 2014, there are no unrecognized tax benefits included in the condensed balance sheet that would, if recognized, affect the Company’s effective tax rate, and the Company has noted no material changes through March 31, 2015. The Company has not recognized interest and penalties in the condensed balance sheets or condensed statements of operations and comprehensive loss. The Company is subject to U.S. and California taxation. As of December 31, 2014, the Company’s tax years beginning 2005 to date are subject to examination by taxing authorities.

Comprehensive Loss

Comprehensive Loss

The Company is required to report all components of comprehensive loss, including net loss, in the condensed financial statements in the period in which they are recognized. Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from nonowner sources, including unrealized gains and losses on marketable securities. Comprehensive gains (losses) have been reflected in the condensed statements of operations and comprehensive loss for all periods presented.

Segment Reporting

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is used in making decisions regarding resource allocation and assessing performance. To date, the Company has viewed its operations and managed its business as one segment operating primarily in the United States.

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. The Company’s potentially dilutive securities, which include warrants, outstanding stock options under the Company’s stock option plans, common stock subject to repurchase by the Company and potential shares to be purchased under the ESPP, have been excluded from the computation of diluted net loss per share in the periods in which they would be anti-dilutive. For all periods presented, there is no difference in the number of shares used to compute basic and diluted shares outstanding due to the Company’s net loss position.

The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because to do so would be anti-dilutive:

	March 31,
	2015		2014
Warrants to purchase common stock		149,704		149,704
Common stock options		2,370,073		1,615,719
Common stock subject to repurchase		103,177		207,680
ESPP shares pending issuance		5,154		—
Total		2,628,108		1,973,103

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This guidance requires management to perform interim and annual assessments on whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year of the date the financial statements are issued. If such conditions or events exist, certain disclosures are required. ASU No. 2014-15 is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the impact of the pending adoption of ASU No. 2014-15 on its financial statements and related disclosures.

XML

Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2015

Fair Value Disclosures [Abstract]

Summary of Assets and Liabilities Measured at Fair Value

Below is a summary of assets and liabilities measured at fair value as of March 31, 2015 and December 31, 2014.

			Fair Value Measurements Using
	March 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	$	6,671,248	$	6,671,248	$	—	$	—
Corporate debt securities		22,700,616		—		22,700,616		—
Total assets	$	29,371,864	$	6,671,248		22,700,616	$	—

			Fair Value Measurements Using
	December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Money market funds	$	6,998,111	$	6,998,111	$	—	$	—
Municipal bonds		70,000		—		70,000		—
Corporate debt securities		28,589,331		—		28,589,331		—
Total assets	$	35,657,442	$	6,998,111	$	28,659,331	$	—

XML

Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)	3 Months Ended
	Mar. 31, 2015 Segment	Mar. 31, 2014
Property, Plant and Equipment [Line Items]
Realized gains and losses on investments	$ 0	$ 0
Other-than-temporary declines in value of marketable securities	0
Impairment losses not recognized	0
Unrecognized tax benefits	$ 0
Number of operating segment	1
Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives of the assets	3 years
Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives of the assets	5 years

XML

Note Payable - Additional Information (Detail) (USD $)	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014	Jul. 31, 2010
Debt Instrument [Line Items]
Note payable	1,000,000	$ 1,000,000
Promissory note [Member] | Pfizer Inc. [Member]
Debt Instrument [Line Items]
Note payable			$ 1,000,000
Debt instrument, interest rate	7.00%
Debt instrument, maturity date	Jul. 29, 2020

XML

Condensed Statements of Cash Flows (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Operating activities
Net loss	$ (5,979,664)	$ (5,243,356)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	17,096	3,356
Stock-based compensation expense	821,672	379,433
Amortization of premium on marketable securities	102,775	195,533
Changes in operating assets and liabilities:
Prepaid and other current assets	272,957	(141,660)
Other assets		(62,981)
Accounts payable and accrued expenses	(939,801)	665,628
Accrued compensation	(278,069)	(857,078)
Deferred rent	35,295
Net cash used in operating activities	(5,947,739)	(5,061,125)
Investing activities
Maturities of marketable securities	14,578,000	13,031,000
Purchase of marketable securities	(10,211,361)	(9,642,248)
Capital expenditures		(12,918)
Net cash provided by investing activities	4,366,639	3,375,834
Financing activities
Deferred public offering costs	(30,965)
Proceeds from exercise of stock options	2,106	12,000
Net cash (used in) provided by financing activities	(28,859)	12,000
Net decrease in cash and cash equivalents	(1,609,959)	(1,673,291)
Cash and cash equivalents at beginning of period	9,912,674	4,158,953
Cash and cash equivalents at end of period	8,302,715	2,485,662
Supplemental disclosure of cash flow information:
Cash paid for interest	17,500	17,500
Supplemental schedule of noncash investing and financing activities
Deferred public offering costs included in accounts payable	$ 185,688

XML

Property and Equipment

3 Months Ended

Mar. 31, 2015

Property, Plant and Equipment [Abstract]

Property and Equipment

5. Property and Equipment

Property and equipment consist of the following:

	Useful Life in Years	March 31, 2015			December 31, 2014
Furniture and fixtures	4	$	239,788		$	239,788
Computer equipment and office equipment	4		162,921			162,921
Leasehold improvements	5		61,533			61,533
			464,242			464,242
Less accumulated depreciation and amortization			(244,272	)		(227,176	)
		$	219,970		$	237,066

XML

Stockholders' Equity - Additional Information (Detail) (USD $)	1 Months Ended	3 Months Ended		1 Months Ended	0 Months Ended
	Jul. 31, 2013	Mar. 31, 2015	Mar. 31, 2014	Apr. 30, 2015	Aug. 14, 2014	Dec. 31, 2014	May 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock, shares issued under sales agreement	6,000,000
Initial public offering of common stock, price per share	$ 11.00
Net proceeds from the issuance of common stock	$ 58,600,000
Common stock, value of shares issued under sales agreement		1,561				1,556
Warrants exercisable, outstanding		149,704
Stock-based compensation		821,672	379,433
Subsequent Events [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock, shares issued under sales agreement				4,025,000
Initial public offering of common stock, price per share				$ 5.75
Net proceeds from the issuance of common stock				21,400,000
2013 Warrants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants exercisable shares							1,124,026
Exercise price of warrant per share							$ 0.90
Warrant expiration date		May 30, 2018
Lender Warrants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants exercisable shares							111,112
Exercise price of warrant per share							$ 0.90
Warrant expiration date		July 3, 2023
Sales Agreement with MLV & Co LLC [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock, shares issued under sales agreement		0
Common stock, value of shares issued under sales agreement					50,000,000
Legal and accounting costs		300,000
Sales Agreement with MLV & Co LLC [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of commission of gross sales price per share					3.00%
IPO [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Legal and accounting costs		$ 200,000
Common Stock [Member] | 2013 Warrants [Member] | Convertible promissory notes [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price of warrant per share							$ 7.43
Warrants exercisable, outstanding							136,236
Common Stock [Member] | Lender Warrants [Member] | Convertible promissory notes [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price of warrant per share							$ 7.43
Warrants exercisable, outstanding							13,468

XML

Organization and Basis of Presentation - Additional Information (Detail) (USD $)	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Date of incorporation	Jul. 13, 2005
Accumulated deficit	$ (102,730,049)	$ (96,750,385)