tcda-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended March 31, 2022


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

For the transition period from to

Commission File Number: 001-38558

TRICIDA, INC.

(Exact name of registrant as specified in its charter)

Delaware

46-3372526

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)

7000 Shoreline Court, Suite 201, South San Francisco, CA 94080

(Address of principal executive offices, including zip code)

(415) 429-7800

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act
Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common stock, par value $0.001 per share	TCDA	The Nasdaq Global Select Market

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

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

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


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

Emerging growth company	☐

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

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

On May 6, 2022, the registrant had 55,424,875 shares of common stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS


Note Regarding Forward-Looking Statements		1
Part I. Financial Information
Item 1.	Financial Statements (Unaudited):	3
	Condensed Balance Sheets as of March 31, 2022 and December 31, 2021	3
	Condensed Statements of Operations and Comprehensive Loss for the three months ended March 31, 2022 and 2021	4
	Condensed Statements of Stockholders’ Equity (Deficit) for the three months ended March 31, 2022 and 2021	5
	Condensed Statements of Cash Flows for the three months ended March 31, 2022 and 2021	6
	Notes to Condensed Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22
Item 4.	Controls and Procedures	22
Part II. Other Information
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	27
	Signatures	28

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Forward-looking statements generally can be identified by words such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

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

•the prospects of veverimer (also known as TRC101), our only investigational drug candidate, which is still in development;

•our ability to obtain approval of our New Drug Application, or NDA, for veverimer from the U.S. Food and Drug Administration, or FDA, under either traditional approval or the Accelerated Approval Program, if at all;

•our ability to resolve the deficiencies identified by the FDA in the Complete Response Letter and issues raised in the Appeal Denied Letter related to our NDA for veverimer;

•our expectations regarding the timing of the completion or early termination of the VALOR-CKD trial and any other nonclinical or clinical study or trial;

•the design of our renal outcomes clinical trial, VALOR-CKD (also known as TRCA-303);

•our expectations regarding endpoint accrual, continuation, timing of completion, the geographic distribution of endpoint events, outcome and reporting of results of our ongoing VALOR-CKD trial;

•the outcome and results of our ongoing VALOR-CKD trial;

•the market acceptance or commercial success of veverimer, if approved, and the degree of acceptance among physicians, patients, patient advocacy groups, health care payers and the medical community;

•our expectations regarding competition, potential market size and the size of the patient population for veverimer, if approved for commercial use;

•our expectations regarding the safety, efficacy and clinical benefit of veverimer;

•our ability to achieve and maintain regulatory approval of veverimer, and any related requirements, restrictions, limitations and/or warnings in the label of veverimer;

•our sales, marketing or distribution capabilities and our ability to commercialize veverimer, if we obtain regulatory approval;

•our current and future agreements with third parties in connection with the manufacturing, commercialization, packaging and distribution of veverimer;

•our expectations regarding the ability of our contract manufacturing partners to produce veverimer in the quantities and timeframe that we will require;

•our expectations regarding our future costs of goods;

•our ability to attract, retain and motivate key personnel;

•the scope of protection we are able to establish and maintain for intellectual property rights covering veverimer;

•potential claims relating to our intellectual property and third-party intellectual property;

•the duration of our intellectual property estate that will provide protection for veverimer;

•our ability to conduct additional financings;

•our ability to establish collaborations in lieu of obtaining additional financing;

•the potential impact of epidemics and pandemics, including COVID-19, local or regional military actions, including the Russian invasion of Ukraine, or natural disasters, on the health care system, financial markets and economy generally and on our business, including on our ongoing VALOR-CKD trial, in particular; and

•our financial performance.

These forward-looking statements are based on management’s current expectations, estimates, forecasts, and projections about our business and the industry in which we operate and management’s beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under, or referenced in, Part II, Item 1A. “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Investors in our securities are urged to consider these factors carefully in evaluating the forward-looking statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. Investors in our securities should, however, review the factors and risks we describe in the reports we will file from time to time with the Securities and Exchange Commission after the date of this Quarterly Report on Form 10-Q.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TRICIDA, INC.

CONDENSED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share amounts)


	March 31, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	17,712	$	21,113
Short-term investments	106,014		119,419
Prepaid expenses and other current assets	4,269		5,004
Total current assets	127,995		145,536
Long-term investments	—		10,043
Property and equipment, net	688		769
Operating lease right-of-use assets	11,731		12,158

Total assets	$	140,414	$	168,506

Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable	$	5,535	$	10,023
Current operating lease liabilities	2,756		2,736

Accrued expenses and other current liabilities	16,703		16,721
Total current liabilities	24,994		29,480


Convertible Senior Notes, net	194,894		127,512
Non-current operating lease liabilities	10,826		11,296

Total liabilities	230,714		168,288
Commitments and contingencies (Note 5)
Stockholders’ equity (deficit):
Preferred stock, $0.001 par value; 40,000,000 shares authorized, no shares issued or outstanding as of March 31, 2022 and December 31, 2021.	—		—
Common stock, $0.001 par value; 400,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 55,397,158 and 55,363,461 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.	55		55
Additional paid-in capital	737,685		810,618
Accumulated other comprehensive income (loss)	(377)		(91)
Accumulated deficit	(827,663)		(810,364)
Total stockholders’ equity (deficit)	(90,300)		218
Total liabilities and stockholders’ equity	$	140,414	$	168,506

See accompanying notes to condensed financial statements (unaudited).

TRICIDA, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(in thousands, except share and per share amounts)


	Three Months Ended March 31,
	2022		2021
Operating expenses:
Research and development	$	18,504	$	32,175
General and administrative	9,170		9,895
Total operating expenses	27,674		42,070
Loss from operations	(27,674)		(42,070)

Other income (expense), net	8		445
Interest expense	(1,973)		(5,613)
Loss on early extinguishment of Term Loan	—		(6,124)


Net loss	(29,639)		(53,362)
Other comprehensive income (loss):
Net unrealized gain (loss) on available-for-sale investments, net of tax	(286)		(105)
Total comprehensive loss	$	(29,925)	$	(53,467)
Net loss per share, basic and diluted	$	(0.51)	$	(1.06)
Weighted-average number of shares outstanding, basic and diluted	57,718,979		50,247,698

See accompanying notes to condensed financial statements (unaudited).

TRICIDA, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

(Unaudited)

(in thousands, except share amounts)



	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
		Shares									Amount
Balance at December 31, 2021		55,363,461	$	55	$	810,618	$	(91)	$	(810,364)		$	218
Cumulative effect of ASU 2020-06 adoption		—	—		(79,498)		—		12,340			(67,158)
Issuance of common stock under equity incentive plans		33,697	—		41		—		—			41
Stock-based compensation		—	—		6,524		—		—			6,524
Net unrealized gain (loss) on available-for-sale investments, net of tax		—	—		—		(286)		—			(286)
Net loss		—	—		—		—		(29,639)			(29,639)
Balance at March 31, 2022		55,397,158	$	55	$	737,685	$	(377)	$	(827,663)		$	(90,300)



	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
		Shares									Amount
Balance at December 31, 2020		50,210,779	$	50	$	742,555	$	64	$	(633,798)		$	108,871
Issuance of common stock under equity incentive plans		61,946	—		115		—		—			115
Stock-based compensation		—	—		6,042		—		—			6,042
Net unrealized gain (loss) on available-for-sale investments, net of tax		—	—		—		(105)		—			(105)
Net loss		—	—		—		—		(53,362)			(53,362)
Balance at March 31, 2021		50,272,725	$	50	$	748,712	$	(41)	$	(687,160)		$	61,561

See accompanying notes to condensed financial statements (unaudited).

TRICIDA, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Three Months Ended March 31,
	2022		2021
Operating activities:
Net loss	$	(29,639)	$	(53,362)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	81		134

Non-cash operating lease costs	(24)		248
Amortization of premiums and accretion of discounts on investments, net	(29)		209
Accretion of Term Loan and Convertible Senior Notes	223		2,628
Loss on early extinguishment of Term Loan	—		6,124
Stock-based compensation	6,524		6,042
Changes in compound derivative liability	—		(202)
Other non-cash items	—		(29)
Changes in operating assets and liabilities:
Prepaid expenses and other assets	737		1,520
Accounts payable	(4,488)		1,815
Accrued expenses and other liabilities	213		3,895

Net cash used in operating activities	(26,402)		(30,978)
Investing activities:
Purchases of investments	(32,059)		(59,932)
Proceeds from maturities of investments	55,250		76,824

Purchases of property and equipment	—		(76)
Net cash provided by investing activities	23,191		16,816
Financing activities:
Proceeds from equity offerings, net	(33)		—

Proceeds from issuance of common stock under equity incentive plans	41		115
Payments for taxes related to net share settlement of equity awards	(198)		—


Repayment of leasehold improvement loan	—		(15)
Cash paid for early extinguishment of Term Loan	—		(83,285)

Net cash used in financing activities	(190)		(83,185)
Net decrease in cash and cash equivalents	(3,401)		(97,347)
Cash and cash equivalents at beginning of period	21,113		137,857
Cash and cash equivalents at end of period	$	17,712	$	40,510
Supplemental disclosures
Cash paid for interest	$	—	$	1,774

See accompanying notes to condensed financial statements (unaudited).

TRICIDA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

Organization—Tricida, Inc., or the Company, was incorporated in the state of Delaware on May 22, 2013. The Company is focused on the development and commercialization of its investigational drug candidate, veverimer (also known as TRC101), a non-absorbed, orally-administered polymer designed to treat metabolic acidosis and slow chronic kidney disease, or CKD, progression in patients with metabolic acidosis and CKD.

Funding Requirements—The Company has sustained operating losses and expects such annual losses to continue over the next several years. The Company’s ultimate success depends on the outcome of its research and development and commercialization activities for veverimer, for which it expects to incur additional losses in the future. Through March 31, 2022, the Company has relied primarily on the proceeds from equity offerings and debt financing to finance its operations.

The Company has incurred losses and negative cash flows from operations since its inception in 2013 and management anticipates that the Company will continue to incur net losses for the foreseeable future. As of March 31, 2022, the Company had an accumulated deficit of $827.7 million. Existing cash, cash equivalents and investments are not likely to be sufficient to fund the Company's operations through the second quarter of 2023 as management expects to incur additional losses in the future to conduct research and development and pre-commercialization activities. Management recognizes that the Company will need to raise additional capital to fully implement its business plan. The Company plans to evaluate obtaining additional capital prior to the end of 2022. In addition, the Company has Common Warrants outstanding that are eligible for exercise at the discretion of the holders starting on May 15, 2022. See a full description of the Common Warrants in Note 6. "Stockholders' Equity".

If financing is not available at adequate levels, on reasonable terms or within a reasonable time frame, the Company will need to reevaluate its operating plans and could be required to significantly reduce operating expenses and delay, reduce the scope of, or eliminate some of its development programs or its future commercialization efforts, out-license intellectual property rights to its investigational drug candidates and sell unsecured assets, or a combination of the above, any of which may have a material adverse effect on its business, results of operations, financial condition and/or its ability to fund its scheduled obligations on a timely basis or at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date of the issuance of these condensed financial statements.

The accompanying unaudited condensed financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The unaudited condensed financial statements do not reflect any adjustments relating to the recoverability and reclassifications of assets and liabilities that might be necessary if the Company is unable to continue as a going concern.

Basis of Presentation—The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The condensed financial statements as of and for the three months ended March 31, 2022 and 2021 are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The condensed balance sheet as of December 31, 2021 has been derived from audited financial statements.

Although the Company believes that the disclosures in these condensed financial statements are adequate to make the information presented not misleading, certain information and footnote information normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission.

Results for any interim period are not necessarily indicative of results for any future interim period or for the entire year. The accompanying condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no material changes to the significant accounting policies discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, other than the adoption of ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), or ASU 2020-06, as described below.

Recent Accounting Pronouncements

Adopted Standards

In August 2020, the FASB issued ASU 2020-06. ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in Accounting Standards Codification, or ASC, 470-20, Debt – Debt with Conversion and Other Options, or ASC 470-20, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock. In addition, the amendments revise the scope exception from derivative accounting in ASC 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity, for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification. These amendments are expected to result in more freestanding financial instruments qualifying for equity classification (and, therefore, not accounted for as derivatives), as well as fewer embedded features requiring separate accounting from the host contract.

The Company adopted ASU 2020-06 effective January 1, 2022, using the modified retrospective method. On adoption, the Company accounted for the Convertible Senior Notes as a single liability measured at amortized cost resulting in reduced prospective non-cash interest expense due to the de-recognition of the remaining debt discount associated with the equity component. The cumulative impact of the adoption of ASU 2020-06 reflected on the Company's condensed balance sheet as of January 1, 2022 is as follows.


in thousands	Balance at December 31, 2021		Cumulative Impact of ASU 2020-06 Adoption		Balance at January 1, 2022
Liabilities
Convertible Senior Notes, net	$	127,512	$	67,158	$	194,670
Stockholder's Equity
Additional paid-in capital	810,618		(79,498)		731,120
Accumulated deficit	(810,364)		12,340		(798,024)

Under the modified retrospective method, financial information and disclosures for periods before January 1, 2022 will continue to be presented in accordance with ASC 470-20. The adoption did not impact previously reported amounts in our condensed statements of operations and comprehensive loss and cash flows and our basic and diluted net loss per share amounts.

NOTE 3. FAIR VALUE MEASUREMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of the Company’s financial assets and liabilities are determined in accordance with the fair value hierarchy established in the FASB's ASC Topic 820, Fair Value Measurements and Disclosures, or Topic 820. Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy of Topic 820 requires an entity to maximize the use of observable inputs when measuring fair value and classifies those inputs into three levels:

Level 1—Observable inputs, such as quoted prices in active markets;

Level 2—Inputs, other than the quoted prices in active markets, which are observable either directly or indirectly such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the instrument’s anticipated life; and

Level 3—Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Our financial instruments consist primarily of cash and cash equivalents, short-term and long-term investments, accounts payable and the Convertible Senior Notes.

Cash, cash equivalents and investments are reported at their respective fair values on the Company's condensed balance sheets. Where quoted prices are available in an active market, securities are classified as Level 1. The Company classifies money market funds and U.S. Treasury securities as Level 1. When quoted market prices are not available for a specific security, then the Company estimates fair value by using quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Where applicable, these models incorporate expected future cash flows and discount the future amounts to a present value using market-based observable inputs obtained from various third-party data providers, including but not limited to benchmark yields, reported trades and broker/dealer quotes. Where applicable the market approach utilizes prices and information from market transactions for similar or identical assets. The Company classifies U.S. government agency securities, commercial paper and corporate debt securities as Level 2. The Company's short-term and long-term investments are classified as available-for-sale.

The following tables set forth the value of the Company's financial assets remeasured on a recurring basis based on the three-tier fair value hierarchy by significant investment category as of March 31, 2022 and December 31, 2021.


	March 31, 2022
									Reported as:
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Cash and Cash Equivalents		Short-Term Investments		Long-Term Investments
Cash	$	2,370	$	—	$	—	$	2,370	$	2,370	$	—	$	—
Level 1:
Money market funds	10,351		—		—		10,351		10,351		—		—
U.S. Treasury securities	31,087		—		(107)		30,980		—		30,980		—
Subtotal	41,438		—		(107)		41,331		10,351		30,980		—
Level 2:
U.S. government agency securities	5,000		—		(13)		4,987		—		4,987		—
Commercial paper	73,182		—		(144)		73,038		4,991		68,047		—
Corporate debt securities	2,022		—		(22)		2,000		—		2,000		—

Subtotal	80,204		—		(179)		80,025		4,991		75,034		—
Total assets measured at fair value	$	124,012	$	—	$	(286)	$	123,726	$	17,712	$	106,014	$	—


	December 31, 2021
									Reported as:
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Cash and Cash Equivalents		Short-Term Investments		Long-Term Investments
Cash	$	2,965	$	—	$	—	$	2,965	$	2,965	$	—	$	—
Level 1:
Money market funds	18,148		—		—		18,148		18,148		—		—
U.S. Treasury securities	8,028		—		(11)		8,017		—		—		8,017
Subtotal	26,176		—		(11)		26,165		18,148		—		8,017
Level 2:
U.S. government agency securities	10,000		—		—		10,000		—		10,000		—
Commercial paper	107,397		20		(4)		107,413		—		107,413		—
Corporate debt securities	4,036		—		(4)		4,032		—		2,006		2,026

Subtotal	121,433		20		(8)		121,445		—		119,419		2,026
Total assets measured at fair value	$	150,574	$	20	$	(19)	$	150,575	$	21,113	$	119,419	$	10,043

The following table presents a reconciliation of financial liabilities related to the compound derivative liability

associated with the Loan and Security Agreement, or Term Loan, with Hercules Capital Inc., measured at fair value on a recurring basis using Level 3 unobservable inputs for the three months ended March 31, 2022 and 2021. The key valuation assumptions used were the discount rate and the probability of the occurrence of certain events. In conjunction with early extinguishment of the Term Loan on March 12, 2021, the Company extinguished the compound derivative liability associated with the Term Loan.


	Three Months Ended March 31,
(in thousands)	2022		2021
Fair value at beginning of period	$	—	$	202




Extinguishment of compound derivative liability upon extinguishment of Term Loan	—		(202)
Fair value at end of period	$	—	$	—

The estimated fair value of the Convertible Senior Notes was $105.6 million as of March 31, 2022 measured using Level 3 inputs. The key valuation assumptions used consist of the discount rate of 21.8% and volatility of 85.0%.

NOTE 4. BORROWINGS

On May 22, 2020, the Company issued $200.0 million aggregate principal amount of 3.50% convertible senior notes due 2027, or the Convertible Senior Notes. The Convertible Senior Notes are convertible into cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock at the Company’s election at an initial conversion rate of 30.0978 shares of the Company’s common stock per $1,000 principal amount of the Convertible Senior Notes, which is equivalent to an initial conversion price of approximately $33.23 per share of the Company’s common stock. The conversion rate is subject to customary adjustments for certain events as described in the Indenture. It is the Company’s current intent to settle conversions through combination settlement, which involves repayment of the principal portion in cash and any excess of the conversion value over the principal amount in shares of its common stock. As of March 31, 2022, the “if-converted value” did not exceed the remaining principal amount of the Convertible Senior Notes.

At issuance, the Convertible Senior Notes were bifurcated into liability and equity components and accounted for separately. The carrying amount of the liability component was calculated to be $117.7 million by measuring the fair value of similar debt instruments that did not have an associated convertible feature. The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the par value of the Convertible Senior Notes. The carrying amount of the equity component was calculated to be $82.3 million and was recorded in additional paid-in capital. The allocation of proceeds into the equity component resulted in a debt discount for the Convertible Senior Notes that was amortized to interest expense at an effective interest rate of 13.5% through December 31, 2021, over the effective life of the Convertible Senior Notes of 7.0 years, using the effective interest method.

As discussed in Note 2. "Summary of Significant Accounting Policies", effective January 1, 2022, the Company adopted ASU 2020-06 using the modified retrospective method and, as a result, accounted for the Convertible Senior Notes as a single liability measured at amortized cost. The following table presents the Convertible Senior Notes' outstanding balances as of March 31, 2022 and December 31, 2021.


(in thousands)	March 31, 2022		December 31, 2021
Liability component:
Principal	$	200,000	$	200,000
Unamortized discount - equity component	—		(68,926)
Unamortized underwriter discounts and issuance costs	(5,106)		(3,562)
Net carrying amount	$	194,894	$	127,512

Equity component, net of underwriter discounts and issuance costs	$	—	$	79,498

The remaining unamortized debt discount is being amortized to interest expense at an effective interest rate of 4.1% over approximately 5.2 years which is also the remaining life of the Senior Convertible Notes.

The following table presents the interest expense related to the Convertible Senior Notes for the three months ended March 31, 2022 and 2021.


	Three Months Ended March 31,
(in thousands)	2022		2021
Contractual interest expense	$	1,750	$	1,750
Amortization of debt discount	—		2,047
Amortization of underwriter discounts and issuance costs	223		59
Total interest expense	$	1,973	$	3,856

NOTE 5. COMMITMENTS AND CONTINGENCIES

On October 4, 2019, the Company and Patheon Austria GmbH & Co KG, or Patheon, entered into a multi-year Manufacturing and Commercial Supply Agreement as amended by Amendment No. 1 dated March 30, 2021, and Amendment No. 2 dated August 26, 2021, collectively the Supply Agreement, under which Patheon agreed to manufacture and supply veverimer to support the Company's commercialization efforts. Patheon has also agreed to manufacture and supply veverimer to support the Company’s drug development and clinical trial activities. Under the Supply Agreement, the Company is obligated to make certain purchases of API. The Company and Patheon are also parties to a Master Development/Validation Services and Clinical/Launch Supply Agreement, or the MDA, pursuant to which Patheon agreed to manufacture and supply veverimer. Certain manufacturing activities previously governed by the MDA are now subject to the Supply Agreement, whereas other ongoing manufacturing activities under the MDA will continue to be governed by the MDA until such activities are complete.

The Supply Agreement may be terminated by either party following an uncured material breach by the other party, in the event the other party becomes insolvent or subject to bankruptcy proceedings, or in connection with a force majeure event that continues beyond 12 months. In addition, the Supply Agreement may be terminated by the Company upon the occurrence of certain regulatory events or actions, including: (i) if the Company does not obtain regulatory approval for veverimer by a specified date or (ii) if the Company terminates its commercialization of veverimer or fails to launch veverimer by a specified date. The Company’s obligation to purchase veverimer is subject to minimum and maximum annual commitments, with the minimum commitments subject to modest reduction in certain circumstances. Patheon has agreed to make facility improvements under the Supply Agreement and will be the exclusive owner of the purchased equipment and facility improvements. Patheon may manufacture other products with the facility improvements when not occupied by manufacturing veverimer. Under the Supply Agreement, the Company has agreed to reimburse Patheon up to a specified amount for plant modifications. These payments will be expensed to research and development prior to U.S. Food and Drug Administration, or FDA, approval of veverimer.

The Company has contractual obligations from its manufacturing service contracts as of March 31, 2022. The purchase obligations are comprised of our non-cancelable purchase commitments under our Supply Agreement with Patheon. These amounts are based on forecasts that may include estimates of our future market demand, quantity discounts and manufacturing efficiencies.


(in thousands)	Total		2022		2023 - 2024	2025 - 2026	Thereafter

Manufacturing and service contracts	$	549,848	$	13,475

SEC Form 10-Q filed by Tricida Inc.