The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business, include forward-looking statements that involve risks and uncertainties. Investors in our securities should review Part II, Item 1A. "Risk Factors" for a discussion of important factors that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Overview Our goal is to slow the progression of chronic kidney disease, or CKD, in patients with metabolic acidosis and CKD. We are a pharmaceutical company focused on the development and commercialization of our investigational drug candidate, veverimer (also known as TRC101), a non-absorbed, orally-administered polymer designed to treat metabolic acidosis and slow CKD progression by binding and removing acid from the gastrointestinal tract. Metabolic acidosis is a serious condition commonly caused by CKD and is believed to accelerate the progression of kidney deterioration. It can also lead to bone loss, muscle wasting and impaired physical function. Metabolic acidosis in patients with CKD is typically a chronic disease and, as such, requires long-term treatment to mitigate its deleterious consequences. There are currently no therapies approved by theU.S. Food and Drug Administration , or FDA, to slow progression of kidney disease by correcting chronic metabolic acidosis in patients with CKD. We estimate that metabolic acidosis affects approximately 3 million patients with CKD inthe United States , and we believe that slowing the progression of CKD in patients with metabolic acidosis and CKD represents a significant unmet medical need and market opportunity. In addition, considering that acid retention is thought to occur in patients with CKD prior to clinical diagnosis of metabolic acidosis (serum bicarbonate less than 22 mEq/L), we believe there may be potential to pursue a development pathway for veverimer which, with additional data, could expand the market opportunity beyond metabolic acidosis to include patients with CKD and eubicarbonatemia, also known as latent acidosis, who may also benefit from a therapy that aids in acid removal. Veverimer is an in-house discovered, new chemical entity. We have a broad intellectual property estate that we believe will provide patent protection for veverimer until at least 2038 inthe United States , at least 2035 inEurope ,Hong Kong ,Israel ,Japan ,Mexico andRussia , and at least 2034 inAustralia ,China , and certain other markets. Veverimer is a low-swelling, spherical polymer bead that is approximately 100 micrometers in diameter. It is a single, high molecular weight, crosslinked polyamine molecule. The size of veverimer prevents systemic absorption from the GI tract. The high degree of cross-linking within veverimer limits swelling and the overall volume in the GI tract, with the goal of facilitating good GI tolerability. The high amine content of veverimer provides proton binding capacity of approximately 10 mEq/gram of polymer. The size exclusion built into the three-dimensional structure of the polymer enables preferential binding of chloride versus larger inorganic and organic anions, including phosphate, citrate, fatty acids and bile acids. This size exclusion mechanism allows a majority of the binding capacity to be used for hydrochloric acid binding. We submitted our New Drug Application, or NDA, for veverimer through the Accelerated Approval Program as a chronic treatment for metabolic acidosis and slowing of kidney disease progression in patients with metabolic acidosis associated with CKD for review by the FDA inAugust 2019 . Results from our Phase 3, 12-week efficacy trial, TRCA-301, and a follow-on 40-week extension trial, TRCA-301E, formed the primary basis of our NDA submission. The TRCA-301 trial met both its primary and secondary endpoints in a highly statistically significant manner (p < 0.0001 for both the primary and secondary endpoints). The TRCA-301E trial met its primary and all secondary endpoints.The Lancet published the results of the TRCA-301 trial inMarch 2019 and the results of the TRCA-301E trial inJune 2019 . We commenced our ongoing VALOR-CKD renal outcomes trial in the fourth quarter of 2018 to confirm veverimer's ability to slow CKD progression through the treatment of metabolic acidosis in patients with CKD. InAugust 2020 , we received a Complete Response Letter, or CRL, from the FDA related to our NDA for veverimer. According to the CRL, the FDA is seeking additional data beyond the TRCA-301/TRCA-301E trial regarding the magnitude and durability of the treatment effect of veverimer on the surrogate marker of serum bicarbonate and expressed concern regarding whether the demonstrated effect size would be reasonably likely to 17 -------------------------------------------------------------------------------- predict clinical benefit. In addition, the CRL questioned the applicability of the treatment effect to theU.S. population and the practice of medicine inthe United States . The FDA also expressed concern as to the reliability of the findings given that the findings for the TRCA-301/TRCA-301E trial, were driven by a single, high-enrolling trial site located inEastern Europe . The CRL did not raise any concerns related toFDA's completed inspection of the highest enrolling clinical trial site in the TRCA-301/TRCA-301E trial and there was no FDA Form 483 issued. There were no safety, clinical pharmacology/biopharmaceutics, CMC, or non-clinical issues identified in the CRL. The CRL provided multiple options for resolving the identified deficiencies, including submission of the data from at least one additional adequate and well-controlled trial demonstrating the efficacy of veverimer for the treatment of metabolic acidosis associated with CKD. We held an End-of-Review Type A meeting, or Type A meeting, with theFDA's Division of Cardiology and Nephrology , or the Division, inOctober 2020 . The Division agreed, in principle, that an interim analysis of serum bicarbonate data from the VALOR-CKD trial proposed byTricida could address the Division's concerns regarding the reliability of the TRCA-301/TRCA-301E trial data and the relevance of those trial findings to theU.S. population provided certain conditions were met. Based on other feedback from the FDA during the Type A meeting, we believed the Division would also require evidence of veverimer's effect on CKD progression from a near-term interim analysis of the VALOR-CKD trial for accelerated approval and that the FDA would be unlikely to rely solely on serum bicarbonate data for determination of efficacy. Accordingly, we submitted a Formal Dispute Resolution Request, or FDRR, solely requesting that theOffice of New Drugs , or OND, find that the magnitude of serum bicarbonate change seen in the TRCA-301/TRCA-301E trial is reasonably likely to predict clinical benefit in the treatment of metabolic acidosis associated with CKD and that it can therefore serve as the basis for accelerated approval. InFebruary 2021 , the OND issued a decision on our FDRR. While the OND acknowledged that the TRCA-301 and TRCA-301E trials met their serum bicarbonate endpoints with statistical significance, the OND denied the appeal. In its Appeal Denied Letter, or ADL, the OND not only addressed the issue of magnitude of serum bicarbonate change, but cited all of the deficiencies in the CRL in concluding that the data provided in support of the veverimer NDA did not support approval through the Accelerated Approval Program. The OND concluded that the magnitude of the increases in serum bicarbonate levels shown in the TRCA-301/TRCA-301E trial was not of sufficient size or duration to establish that treatment with veverimer would be reasonably likely to provide a discernible reduction in CKD progression. In addition, the OND found that the intended confirmatory trial, VALOR-CKD (also known as TRCA-303), was underpowered to detect a 13% reduction in slowing of CKD progression. This finding was based on information included in the initial NDA submission including the placebo-subtracted LS mean change from baseline in serum bicarbonate observed in the TRCA-301/TRCA-301E trial and the original Predictive MA Model. The OND also raised concerns regarding the robustness of the study results given that the veverimer NDA was supported by a single registrational trial (TRCA-301/TRCA-301E), which must, alone, provide persuasive evidence of benefit. Specifically, the OND noted concerns around adequate blinding, the trial results being strongly influenced by a single site, and the majority of sites for the TRCA-301/TRCA-301E trial being inEastern Europe , where differences in patient management, including concomitant medications and diet, might affect the treatment response to veverimer and raise a concern of the applicability to aU.S. patient population. The OND also stated that, while trial results in the TRCA-301/TRCA-301E trial showed improvement in two patient-reported measures, theKDQOL Physical Functioning Survey and the Repeated Chair Stand Test, the OND viewed this subjective data from a single trial with skepticism in the absence of data from a second trial with similar results, and noted that both endpoints would require rigorous blinding to support robust conclusions. However, the OND noted that both of these changes, if eventually established by one or more additional trials, would indicate a potentially meaningful benefit of veverimer treatment-especially in CKD patients who have physical functional impairments. Separate from the ADL, we previously received feedback from theDivision of Clinical Outcome Assessment , or DCOA, that reliance on these physical function endpoints for approval may require further validation. Based on the ADL, we believe that we now have greater clarity on the potential path for approval of veverimer through the Accelerated Approval Program. The OND suggested that we meet with the Division to discuss submission of Week 52 serum bicarbonate results from the full randomized trial population of VALOR-CKD and that the trial should include a substantial portion of patients fromthe United States or from regions with "U.S. -like" patients. If the results of this trial were to demonstrate that veverimer provides a meaningfully larger treatment effect than seen in the TRCA-301/TRCA-301E trial, then this trial, along with the results from the TRCA-301/TRCA-301E trial, could address the concerns raised in the CRL regarding the limitations and the size of the treatment response observed in the TRCA-301/TRCA-301E trial. However, whether the extent of increase in serum bicarbonate in any subsequent submission based on VALOR-CKD would support accelerated approval would be a review issue, and would, in part, reflect the Division's assessment of the adequacy (i.e., power) of VALOR-CKD to detect the 18 -------------------------------------------------------------------------------- anticipated treatment effect of CKD progression in a reasonable timeframe. We believe the timeline to meet the requirements for accelerated approval as suggested in the ADL may not result in the most rapid pathway for resubmission of the NDA for veverimer or be achievable with our current resources. Based on the current enrollment rate, the week 52 serum bicarbonate data from the fully enrolled VALOR-CKD trial suggested in the ADL would not be available until at least early 2023, but there are scenarios where renal outcomes data from the VALOR-CKD trial would become available earlier and could potentially enable resubmission of the NDA through the traditional approval process, but it may or may not be sufficient. At this time, we no longer believe it is practical to pursue approval on the basis of serum bicarbonate data alone and we are focused on obtaining outcomes data from the VALOR-CKD trial. Our ongoing VALOR-CKD trial is a randomized double-blind, placebo-controlled time-to-event trial. The primary endpoint event in VALOR-CKD is defined as renal death, end-stage renal disease, or ESRD, or a confirmed ? 40% reduction in estimated glomerular filtration rate (eGFR) (DD40). We designed the study to randomize approximately 1,600 subjects and the trial is currently designed to terminate when the independent blinded Clinical Endpoint Adjudication Committee, or CEAC, has positively adjudicated 511 subjects with primary endpoint events, which is anticipated to occur in the first half of 2024. The current VALOR-CKD trial protocol includes the ability to stop the trial early for administrative reasons and for a single interim analysis for early stopping for efficacy after 250 subjects with primary endpoint events have accrued (anticipated in mid-2022, based on the current rate of primary endpoint event accrual). The current protocol provides for the interim analysis to be conducted by an independent unblinded Interim Analysis Committee. If the Interim Analysis Committee recommends stopping the trial early for efficacy, and we agree with that recommendation, the study will be terminated and data from the trial will be analyzed according to the pre-specified statistical analysis plan. However, if the Interim Analysis Committee does not recommend stopping the trial early for efficacy, we will receive no information from the interim analysis. The VALOR-CKD trial protocol also includes, as its first two secondary efficacy endpoints, evaluation of the effect of veverimer versus placebo after one year of treatment on patient-reported and objective measures of physical functioning, using theKDQOL Physical Functioning Survey and the Repeated Chair Stand test, respectively. Although not part of any efficacy endpoints, the VALOR-CKD trial will also provide information regarding the change from baseline in serum bicarbonate in veverimer and placebo-treated subjects. There is a substantial likelihood that we will not have, or be able to obtain on reasonable terms in the necessary timeframe, adequate resources to continue the VALOR-CKD trial until we reach the current target of 511 subjects with positively adjudicated primary endpoint events, which we anticipate would not be reached until 2024. As such, we have considered various options to terminate the VALOR-CKD trial early. We requested and were granted a Type A meeting with the FDA to discuss approaches to stopping the VALOR-CKD trial early based on financial resources and the procedures for study close-out. Consistent with feedback provided by the FDA in its preliminary comments for the Type A meeting, we believe that, among the alternatives considered, stopping the VALOR-CKD trial early for administrative reasons pursuant to the existing protocol is likely to provide the most complete and interpretable data, reduce the risk of missing data required for key efficacy analyses, and maintain the integrity of the trial. While the exact timing of the administrative stop will be determined by our financial runway, we anticipate that an administrative stop would occur in the first half of 2022. Accordingly, we are not likely to conduct the 250-event interim analysis. Based on feedback from the FDA, we will halt enrollment of additional patients in the VALOR-CKD trial in order to focus resources on maximizing the duration of follow-up in subjects who are currently enrolled in the trial. Stopping the VALOR-CKD trial early could increase the risk that the trial will not be successful. For the VALOR-CKD trial to be successful if stopped early, veverimer will need to demonstrate greater efficacy compared to placebo than if the trial were continued to 511 subjects with primary endpoint events. Even if the VALOR-CKD trial meets its primary endpoint, the data obtained from the trial may not be sufficient to support a resubmission and/or approval of the NDA. We initiated enrollment in the VALOR-CKD trial in the fourth quarter of 2018 and have established sites throughoutNorth America ,Europe ,Latin America andAsia-Pacific . As ofNovember 5, 2021 , the VALOR-CKD trial has randomized over 1,470 of 1,600 subjects with an average treatment duration of approximately 19 months and has accrued 159 subjects with positively adjudicated primary endpoint events. InNovember 2020 , based on feedback from the FDA, recruitment for VALOR-CKD was closed in all regions except forthe United States ,Canada andWestern Europe ; however, we later reopened recruitment at sites inLatin America andAsia-Pacific . Based on feedback from the FDA in its preliminary comments for the Type A meeting receivedNovember 4, 2021 , we will halt enrollment of additional patients in the VALOR-CKD trial. As ofNovember 5, 2021 , 72% of subjects have been enrolled at Eastern European sites, 11% atU.S. , Western European and Canadian sites, and the remainder at Latin American andAsia-Pacific region sites. Due to the time required for enrolled subjects to experience endpoint 19 -------------------------------------------------------------------------------- events, if the VALOR-CKD trial is terminated in 2022, the number of endpoint events being contributed from subjects inthe United States or regions with "U.S. -like" subjects will likely be smaller as a percentage of total events than if the trial were continued until 511 events. If the VALOR-CKD trial is terminated in 2022, the number of endpoint events from subjects inthe United States or regions with "U.S. -like" subjects is likely to be less than 10%. We intend that no single site in the VALOR-CKD trial provides ? 5% of the total number of trial subjects. However, if the trial is terminated in 2022, it is possible that one or more sites may slightly exceed this threshold. We believe data from the VALOR-CKD trial will be very important to inform our decisions regarding the viability of and the appropriate regulatory path for resubmission of the NDA for veverimer. For example, if the VALOR-CKD trial is stopped in 2022, additional data on the effect of veverimer on (1) CKD progression; (2) physical functioning; and (3) serum bicarbonate will become available then. The data obtained from the VALOR-CKD trial may or may not be sufficient to support resubmission and/or approval of the NDA. Regardless of the regulatory pathway, theFDA's acceptance of the VALOR-CKD data in support of an NDA resubmission, including its assessment of the magnitude and durability of the veverimer treatment effect across the various geographic regions where the study is conducted and the acceptability of the data from non-U.S. countries or regions which will comprise a substantial proportion of the data from the trial, will ultimately be a review issue. Resubmission and approval of the veverimer NDA could also require additional clinical data beyond that provided by the VALOR-CKD trial. Together with our investigators, contract research organizations, or CROs, and other contract service providers, we are regularly assessing the impact of the COVID-19 pandemic on recruitment and retention of subjects in, and power of, our ongoing VALOR-CKD trial. At this time, safety monitoring activities, adjudication of endpoint events and provision of clinical trial supplies have not been materially affected by COVID-19. The annualized rate of all-cause mortality in VALOR-CKD is higher than we estimated when designing the trial, in part due to the COVID-19 pandemic. We estimated the study would have an annualized study discontinuation rate, which comprises deaths, subjects lost to follow up and those who withdraw their consent to continue to participate and be followed in the study, of 5%; currently the annualized study discontinuation rate is approximately 7%. To the extent current trends continue, there may be negative impacts on the trial in the future, including but not limited to patient retention, compliance with the study protocol and powering due to the impact of COVID-19. We have provided investigators additional guidance per general FDA andEuropean Medicines Agency , or EMA, recommendations on clinical trial conduct during COVID-19 to ensure the ongoing VALOR-CKD trial is effectively conducted with the utmost attention to trial subject and investigator safety while maintaining compliance with applicable clinical trial regulations and principles of Good Clinical Practice and minimizing risks to the trial's integrity. We will continue to monitor the potential impact that COVID-19 may have on our ongoing VALOR-CKD trial. At this time, we believe we have sufficient drug substance and access to sufficient drug product manufacturing capacity to supply the anticipated demand of our ongoing VALOR-CKD trial through conclusion of the trial. Veverimer drug substance manufacturing is conducted for us byPatheon Austria GmbH & Co KG , or Patheon, in their Linz,Austria facility. We are in regular communication with Patheon andPCI Pharma Services , our drug product manufacturer and, to our knowledge, there have not been business disruptions at these sites due to COVID-19 affecting the production of veverimer drug substance and drug product. At this time, we have not experienced any material disruption in the distribution network for veverimer, including the provision of raw materials, the shipping of drug substance and drug product and the provision of clinical trial supplies to trial participants. We have no products approved for marketing, and we have not generated any revenue from product sales or other arrangements. From our inception in 2013 throughSeptember 30, 2021 , we have primarily funded our operations through the sale of$152.4 million of convertible preferred stock, net proceeds of$237.7 million from our initial public offering, or IPO, onJuly 2, 2018 , net proceeds of$217.9 million from our underwritten public offering onApril 8, 2019 and net proceeds of$193.3 million from the issuance of$200.0 million aggregate principal amount of 3.50% convertible senior notes due 2027, or the Convertible Senior Notes, onMay 22, 2020 and net borrowing of$72.1 million after fees of$2.9 million under the Loan and Security Agreement, or Term Loan, entered into with Hercules Capital Inc., or Hercules, onFebruary 28, 2018 . We have incurred losses in each year since our inception in 2013. Our net losses were$39.7 million and$77.7 million for the three months endedSeptember 30, 2021 and 2020, respectively, and$126.6 million and$209.9 million for the nine months endedSeptember 30, 2021 and 2020, respectively. As ofSeptember 30, 2021 , we had an accumulated deficit of$760.4 million . Substantially all of our operating losses resulted from expenses incurred in connection with advancing veverimer through development activities and general and administrative costs associated with pre-commercialization activities and administrative functions. At this time, COVID-19 has not materially impacted our current financial resources or our outlook. 20 -------------------------------------------------------------------------------- We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. Our net losses may fluctuate significantly from quarter to quarter and year to year. We expect our expenses will continue in connection with our ongoing activities as we: •conduct clinical studies of veverimer, including the ongoing VALOR-CKD trial; •continue to optimize the manufacturing processes and manufacture drug substance and drug product to support the ongoing VALOR-CKD trial and the commercial launch, if approved; •increase our research and development efforts; •create additional infrastructure to support our product development; •seek regulatory approval for veverimer, including any activities necessary for the resubmission of the NDA for veverimer; •maintain, expand and protect our intellectual property portfolio; and •maintain operational, financial and management information systems to support ongoing operations, including operating as a public company. We do not expect to generate any revenue from product sales until we successfully complete development and obtain regulatory approval for veverimer. If we obtain regulatory approval for veverimer, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, we will seek to fund our operations through available cash from our prior equity offerings and the Convertible Senior Note issuance, and, as necessary, through additional public or private equity or debt financings or other sources. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and ability to develop veverimer. We believe that our existing cash, cash equivalents and investments are not likely to be sufficient to fund our operations following the end of 2022. Components of Our Results ofOperations Research and Development Expense Research and development expense consists primarily of costs associated with the development of veverimer and includes salaries, bonuses, benefits, travel and other related costs, including stock-based compensation expense, for personnel engaged in research and development functions; expenses incurred under agreements with CROs, investigative sites and consultants that conduct our nonclinical and clinical studies; manufacturing processes optimization and the cost of manufacturing drug substance for commercial and clinical use as well as drug product to support the ongoing VALOR-CKD trial; payments to consultants engaged in the development of veverimer, including stock-based compensation, travel and other expenses; costs related to compliance with quality and regulatory requirements; research and development facility-related expenses, which include direct and allocated expenses, and other related costs. Research and development expense is charged to operations as incurred when these expenditures relate to our research and development efforts and have no alternative future uses. Payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. All of our research and development expense to date has been incurred in connection with veverimer. We expect our research and development expense to increase for the foreseeable future as we optimize our manufacturing processes and advance veverimer through clinical development, including our ongoing VALOR-CKD trial. The process of conducting clinical studies necessary to obtain regulatory approval is costly and time consuming and the successful development of veverimer is highly uncertain. As a result, we are unable to determine the duration and completion costs of our research and development projects or when, and to what extent, we will generate revenue from commercialization and sale of veverimer, if approved. Therefore, we are unable to estimate with any certainty the costs we will incur in the continued development of veverimer. The degree of success, timelines and cost of development can differ materially from expectations. We may never succeed in achieving regulatory approval for veverimer. General and Administrative Expense 21 -------------------------------------------------------------------------------- General and administrative expense consists primarily of salaries, bonuses, benefits, travel, stock-based compensation expense and facility-related expenses for personnel in finance and administrative functions. General and administrative expense also includes professional fees for legal, patent, consulting, accounting and audit services, pre-commercial preparation, medical affairs costs and recruiting services for the potential launch of veverimer and other related costs. Restructuring Costs Expenses related to restructuring activities are recorded in operating expenses as part of research and development expense and general and administrative expense as appropriate. OnSeptember 10, 2020 , the Compensation Committee of the Board of Directors approved theTricida, Inc. 2020 Reduction in Force Severance Benefit Plan, or 2020 Restructuring Plan. OnSeptember 18, 2020 , we implemented a restructuring, or Third Quarter 2020 Restructuring, under the 2020 Restructuring Plan to streamline the organization and preserve capital that included the elimination of approximately 21.5% of our workforce and other cost reductions. OnOctober 25, 2020 , our Board of Directors approved and onOctober 28, 2020 , we implemented a restructuring under the 2020 Restructuring Plan, or Fourth Quarter 2020 Restructuring, to reduce operating costs and better align our workforce with the needs of our business following the completion of the Type A meeting with the FDA inOctober 2020 . The Fourth Quarter 2020 Restructuring resulted in the elimination of approximately 60.0% of our workforce and included one-time termination severance payments and other employee-related costs, and exit costs including contract termination costs and accelerated depreciation of capitalized software. Restructuring costs of$0.1 million were recorded in operating expenses in our condensed statements of operations and comprehensive loss for the nine months endedSeptember 30, 2021 . Results of Operations The following table presents our results of operations for the three and nine months endedSeptember 30, 2021 and 2020. Three Months Ended Nine Months Ended September 30, Change September 30, Change (in thousands) 2021 2020 $ % 2021 2020 $ % Operating expenses: Research and development$ 26,635 $ 42,996 $ (16,361) (38) %$ 78,591 $ 121,134 $ (42,543) (35) % General and administrative 9,052 29,273 (20,221) (69) % 28,497 81,217 (52,720) (65) % Total operating expenses 35,687 72,269 (36,582) (51) % 107,088 202,351 (95,263) (47) % Loss from operations (35,687) (72,269) 36,582 (51) % (107,088) (202,351) 95,263 (47) % Other income (expense), net 6 907 (901) (99) % 155 4,395 (4,240) (96) % Interest expense (3,994) (6,267) 2,273 (36) % (13,533) (12,043) (1,490) 12 % Loss on early extinguishment of Term Loan - - - N/M (6,124) - (6,124) N/M Loss before income taxes (39,675) (77,629) 37,954 (49) % (126,590) (209,999) 83,409 (40) % Income tax benefit (expense) - (36) 36 (100) % - 50 (50) (100) % Net loss$ (39,675) $ (77,665) $ 37,990 (49) %$ (126,590) $ (209,949) $ 83,359 (40) % N/M = Not meaningful Research and Development Expense The following table presents our research and development expense for the three months endedSeptember 30, 2021 and 2020. Three Months Ended September 30, Change (in thousands) 2021 2020 $ % Clinical development costs$ 20,060 $ 36,473 $ (16,413) (45) % Personnel and related costs 2,880 2,937 (57) (2) % Stock-based compensation expense 2,819 2,937 (118) (4) % Other research and development costs 876 649
227 35 %
Total research and development expense
Comparison of the three months endedSeptember 30, 2021 and 2020 Research and development expense was$26.6 million and$43.0 million for the three months endedSeptember 30, 2021 and 2020, respectively. The decrease of$16.4 million was due to decreased activities in connection with our veverimer clinical development program, resulting in a decrease of clinical development costs of$16.4 million related to manufacturing process optimization and drug substance manufacturing costs related to our VALOR-CKD trial; decreased personnel and related costs of$0.1 million related to the workforce reduction following the Third Quarter 2020 Restructuring and the Fourth Quarter 2020 Restructuring; decreased stock-based compensation expense of$0.1 million related to performance awards granted inAugust 2019 and our workforce reduction, partially offset by higher costs related to annual awards granted inJanuary 2021 ; partially offset by an increase in other research and development costs of$0.2 million due to facilities related costs. The following table presents our research and development expense for the nine months endedSeptember 30, 2021 and 2020. Nine Months Ended September 30, Change (in thousands) 2021 2020 $ % Clinical development costs$ 58,855 $ 98,530 $ (39,675) (40) % Personnel and related costs 9,160 10,818 (1,658) (15) % Stock-based compensation expense 7,948 9,261 (1,313) (14) % Other research and development costs 2,628 2,525
103 4 %
Total research and development expense
Comparison of the nine months endedSeptember 30, 2021 and 2020 Research and development expense was$78.6 million and$121.1 million for the nine months endedSeptember 30, 2021 and 2020, respectively. The decrease of$42.5 million was due to decreased activities in connection with our veverimer clinical development program, resulting in a decrease of clinical development costs of$39.7 million related to manufacturing process optimization and drug substance manufacturing costs related to our VALOR-CKD trial; decreased personnel and related costs of$1.7 million related to the workforce reduction following the Third Quarter 2020 Restructuring and the Fourth Quarter 2020 Restructuring; decreased stock-based compensation expense of$1.3 million related to performance awards granted inAugust 2019 and our workforce reduction, partially offset by higher costs related to annual awards granted inJanuary 2021 ; partially offset by an increase in other research and development costs of$0.1 million due to facilities related costs. General and Administrative Expense The following table presents our general and administrative expense for the three months endedSeptember 30, 2021 and 2020. Three Months Ended September 30, Change (in thousands) 2021 2020 $ % Personnel and related costs$ 2,255 $ 10,174 $ (7,919) (78) % Stock-based compensation expense 3,830 4,718 (888) (19) % Other general and administrative costs 2,967 14,381
(11,414) (79) %
Total general and administration expense
22 -------------------------------------------------------------------------------- Comparison of the three months endedSeptember 30, 2021 and 2020 General and administrative expense was$9.1 million and$29.3 million for the three months endedSeptember 30, 2021 and 2020, respectively. The decrease of$20.2 million was due to a decrease in pre-commercialization and administrative activities in connection with our veverimer clinical development program, resulting in decreased personnel and related costs of$7.9 million due to the workforce reduction following the Third Quarter 2020 Restructuring and the Fourth Quarter 2020 Restructuring; decreased stock-based compensation expense of$0.9 million related to our workforce reduction and performance awards granted inAugust 2019 , partially offset by higher costs related to annual awards granted inJanuary 2021 ; and a decrease in other general and administrative costs of$11.4 million primarily related to reduction in pre-commercialization activities, medical affairs activities, legal, recruiting and training costs. The following table presents our general and administrative expense for the nine months endedSeptember 30, 2021 and 2020. Nine Months Ended September 30, Change (in thousands) 2021 2020 $ % Personnel and related costs$ 7,097 $ 24,848 $ (17,751) (71) % Stock-based compensation expense 11,352 15,847 (4,495) (28) % Other general and administrative costs 10,048 40,522
(30,474) (75) %
Total general and administration expense
Comparison of the nine months endedSeptember 30, 2021 and 2020 General and administrative expense was$28.5 million and$81.2 million for the nine months endedSeptember 30, 2021 and 2020, respectively. The decrease of$52.7 million was due to a decrease in pre-commercialization and administrative activities in connection with our veverimer clinical development program, resulting in decreased personnel and related costs of$17.8 million due to the workforce reduction following the Third Quarter 2020 Restructuring and the Fourth Quarter 2020 Restructuring; decreased stock-based compensation expense of$4.5 million related to our workforce reduction and performance awards granted inAugust 2019 , partially offset by higher costs related to annual awards granted inJanuary 2021 ; and a decrease in other general and administrative costs of$30.5 million primarily related to reduction in pre-commercialization activities, medical affairs activities, recruiting and training costs. Liquidity and Capital Resources Sources of Liquidity From our inception in 2013 throughSeptember 30, 2021 , we have primarily funded our operations through the sale of$152.4 million of convertible preferred stock, net proceeds of$237.7 million from our IPO onJuly 2, 2018 , net proceeds of$217.9 million from our underwritten public offering of common stock onApril 8, 2019 , net proceeds of$193.3 million from the issuance of Convertible Senior Notes onMay 22, 2020 and net borrowing of$72.1 million under the Term Loan. As ofSeptember 30, 2021 , we had cash, cash equivalents and investments of$146.8 million .Hercules Loan and Security Agreement OnMarch 12, 2021 , we repaid the outstanding principal of$75.0 million and fees in the amount of$8.3 million to Hercules under the Term Loan. We recognized a loss on early debt extinguishment of$6.1 million which represents the remaining unamortized issuance costs. Convertible Senior Notes OnMay 22, 2020 , we issued$200.0 million aggregate principal amount of Convertible Senior Notes pursuant to an indenture, dated as ofMay 22, 2020 , or the Indenture, between us andU.S. Bank National Association , as trustee, or the Trustee. Net proceeds from the offering were$193.3 million after deducting underwriting discounts and commissions and other offering costs of approximately$6.7 million . Our Convertible Senior Notes are senior unsecured obligations, and interest is payable semi-annually in arrears at a rate of 3.5% per year onMay 15 andNovember 15 of each year, beginning onNovember 15, 2020 . The 23 -------------------------------------------------------------------------------- Convertible Senior Notes mature onMay 15, 2027 , unless earlier repurchased, redeemed or converted and are not redeemable prior toMay 20, 2024 . We may redeem for cash all or any portion of the Convertible Senior Notes, at our option, on or afterMay 20, 2024 and on or before the 40th scheduled trading day immediately prior to the maturity date, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the Convertible Senior Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. We are not required to and no sinking fund is provided for the Convertible Senior Notes. The Convertible Senior Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock at our election at an initial conversion rate of 30.0978 shares of our 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 our common stock. The conversion rate is subject to customary adjustments for certain events as described in the Indenture. It is our 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 our common stock. As ofSeptember 30, 2021 , the "if-converted value" did not exceed the remaining principal amount of the Convertible Senior Notes. Funding Requirements We have incurred losses and negative cash flows from operations since our inception in 2013 and anticipate that we will continue to incur net losses for the foreseeable future. As ofSeptember 30, 2021 , we had an accumulated deficit of$760.4 million . Based on our cash, cash equivalents and investments as ofSeptember 30, 2021 , we believe we have sufficient capital to continue funding our operations for the twelve-month period following the filing of this Quarterly Report on Form 10-Q. However, our existing cash, cash equivalents and investments are not likely to be sufficient to fund our operations following the end of 2022 as we expect to incur additional losses in the future to conduct research and development and to conduct pre-commercialization activities and recognize that we will need to raise additional capital to fully implement our business plan. Such future capital requirements are difficult to forecast and will depend on many factors, including: •the progress, outcome and results of our ongoing VALOR-CKD trial; •the impact of termination of our VALOR-CKD trial; •the costs, timing and success of addressing the deficiencies identified by the FDA in the CRL and issues raised in the ADL related to our NDA for veverimer; •our ability to obtain approval of our NDA for veverimer from the FDA under either traditional approval or the Accelerated Approval Program, if at all; •the findings of the FDA during their routine inspections of our facility and the facilities of our contract manufacturers and clinical trial sites during the NDA review process and our ability to promptly and adequately address any such findings; •the revenue, if any, received from commercial sales of veverimer should we receive regulatory approval; •our ability to maintain and enforce our intellectual property rights and defend any intellectual property-related claims; •the costs, timing and success of the scale-up and optimization of the process of manufacturing veverimer, and our minimum and maximum commitments under the Manufacturing and Commercial Supply Agreement with Patheon, as the same may be amended from time to time; •the costs, timing and success of future commercialization activities, including product manufacturing, marketing, sales and distribution, for veverimer if we receive regulatory approval and do not partner for commercialization; •the cost of fulfilling our minimum contractual obligations to our suppliers and vendors; and 24 -------------------------------------------------------------------------------- •the extent to which we acquire or in-license other products and technologies. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic partnerships and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. If we raise additional funds through collaborations, strategic partnerships or licensing arrangements with third parties, we may have to relinquish valuable rights to veverimer, associated intellectual property, our other technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. However, there can be no assurance that we will be successful in securing additional funding at levels sufficient to fund our operations or on terms acceptable to us. If we are unsuccessful in our efforts to raise additional financing, we could be required to significantly reduce operating expenses and delay, reduce the scope of or eliminate some of our development programs or our future commercialization efforts, out-license intellectual property rights to our investigational drug candidates and sell unsecured assets, cease operations altogether or a combination of the above, any of which may have a material adverse effect on our business, results of operations, financial condition and/or our ability to fund our scheduled obligations on a timely basis or at all. OnJuly 2, 2018 , we completed our IPO and issued and sold an aggregate of 13,455,000 shares of common stock, including the underwriters' exercise in full of their over-allotment option, a public offering price of$19.00 per share. Net proceeds were approximately$237.7 million , after deducting underwriting discounts and commissions of$17.9 million . OnApril 8, 2019 , we consummated an underwritten public offering and issued 6,440,000 shares of common stock, which included the exercise in full by the underwriters of their option to purchase 840,000 additional shares of common stock at an offering price of$36.00 per share for net proceeds of approximately$217.9 million , after deducting underwriting discounts and commissions of$13.9 million . OnMay 22, 2020 , we issued$200.0 million aggregate principal amount of Convertible Senior Notes due 2027. The issuance included the exercise in full by the initial purchasers of their option to purchase an additional$25.0 million aggregate principal amount of Convertible Senior Notes. Net proceeds from the offering were$193.3 million after deducting underwriting discounts and commissions and other offering costs of approximately$6.7 million . Cash Flows The following table presents a summary of the net cash flow activity for the nine months endedSeptember 30, 2021 and 2020. Nine Months Ended September 30, (in thousands) 2021 2020 Net cash provided by (used in): Operating activities$ (101,996) $ (188,818) Investing activities 63,988 (10,140) Financing activities (82,861) 210,096
Net increase (decrease) in cash and cash equivalents
Cash Used in Operating Activities During the nine months endedSeptember 30, 2021 , cash used in operating activities was$102.0 million , which consisted of a net loss of$126.6 million , adjusted by non-cash charges of$33.6 million and changes in cash used in operating assets and liabilities of$9.0 million . The non-cash charges consisted primarily of stock-based compensation of$19.3 million , accretion of Term Loan and Convertible Senior Notes of$7.0 million , loss on early extinguishment of Term Loan of$6.1 million , non-cash operating lease costs of$0.6 million , net amortization of premiums and accretion of discounts on investments of$0.4 million and depreciation and amortization of$0.4 million , partially offset by changes in compound derivative liability of$0.2 million . The changes in cash used in our operating assets and liabilities were primarily due to a decrease in accrued expenses and other liabilities of$8.9 25 -------------------------------------------------------------------------------- million and a decrease in accounts payable of$0.2 million , partially offset by a decrease in prepaid expenses and other assets of$0.1 million . During the nine months endedSeptember 30, 2020 , cash used in operating activities was$188.8 million , which consisted of a net loss of$209.9 million , adjusted by non-cash charges of$30.7 million and changes in cash used in operating assets and liabilities of$9.5 million . The non-cash charges consisted primarily of stock-based compensation of$25.1 million , accretion of Term Loan and Convertible Senior Notes of$5.2 million , depreciation and amortization of$0.7 million and non-cash operating lease costs of$0.6 million , partially offset by changes in fair value of compound derivative liability of$0.7 million and net amortization of premiums and accretion of discounts on investments of$0.3 million . The changes cash used in our operating assets and liabilities were primarily due to a decrease in accounts payable of$4.1 million , an increase in prepaid expenses and other assets of$3.3 million and a decrease in accrued expenses and other liabilities of$2.1 million . Cash Provided by (Used in) Investing Activities Net cash provided by investing activities was$64.0 million for the nine months endedSeptember 30, 2021 and net cash used in investing activities was$10.1 million for the nine months endedSeptember 30, 2020 . The net cash provided by investing activities during the nine months endedSeptember 30, 2021 was due to maturities of investments of$200.4 million , partially offset by purchases of investments of$136.3 million and purchases of property and equipment of$0.1 million . The net cash used in investing activities during the nine months endedSeptember 30, 2020 was due to purchases of investments of$277.0 million and purchases of property and equipment of$1.2 million , partially offset by maturities of investments of$268.0 million . Cash Provided by (Used in) Financing Activities Net cash used in financing activities was$82.9 million for the nine months endedSeptember 30, 2021 and net cash provided by financing activities was$210.1 million for the nine months endedSeptember 30, 2020 . The net cash used in financing activities during the nine months endedSeptember 30, 2021 was primarily due to cash paid for early extinguishment of the Term Loan of$83.3 million , partially offset by proceeds from issuance of common stock under equity incentive plans of$0.5 million . The net cash provided by financing activities during the nine months endedSeptember 30, 2020 was primarily due to net proceeds from the issuance of Convertible Senior Notes of$193.3 million , Term Loan funding of$15.0 million and proceeds from issuance of common stock under equity incentive plans of$1.9 million . Off-Balance Sheet Arrangements During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements as defined under the rules of theSecurities and Exchange Commission . Contractual Obligations and Commitments Based on our cash, cash equivalents and investments as ofSeptember 30, 2021 , we believe we have sufficient capital to continue meeting our contractual obligations for the twelve-month period following the filing of this Quarterly Report on Form 10-Q. However, our existing cash, cash equivalents and investments are not likely to be sufficient to meet our contractual obligations following the end of 2022. For additional details regarding our contractual obligations, see Note 5. "Commitments and Contingencies" to our condensed financial statements in Part I, Item 1. of this Quarterly Report on Form 10-Q. 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 generally accepted accounting principles inthe United States . The preparation of these condensed 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 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 26 --------------------------------------------------------------------------------
may differ significantly from these estimates under different assumptions or
conditions. There have been no material changes to the critical accounting
estimates discussed in our Annual Report on Form 10-K for the year
ended
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