TRICIDA, INC. 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" in this Quarterly Report on Form 10-Q and Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year endedDecember 31, 2021 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
We are a pharmaceutical company focused on 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. Until recently, our primary strategic and operational focus was on completion of the VALOR-CKD renal outcomes clinical trial (also known as TRCA-303), which was designed to evaluate veverimer's ability to slow CKD progression in patients with metabolic acidosis and chronic kidney disease. OnOctober 24, 2022 , we announced that the VALOR-CKD trial did not meet its primary endpoint, which was defined as the time to the first occurrence of any event in the composite endpoint of renal death, end-stage renal disease, or ESRD, or a confirmed greater than or equal to 40% reduction in estimated glomerular filtration rate, or eGFR, also known as DD40. OnNovember 2, 2022 , we announced that the Company had initiated a review of strategic alternatives to maximize stakeholder value and engaged professional advisors, including investment banking and financial advisors, to support this process. We are considering possible strategic alternatives, including a sale of the Company or its assets, a merger, reverse merger, wind-down, liquidation and dissolution or other strategic transaction. OnNovember 8, 2022 , we put into place a reduction in force plan which includes an approximate 57.0% reduction in workforce inNovember 2022 . We estimate aggregate costs of approximately$2.0 million , recorded primarily in the fourth quarter of 2022, related to one-time termination severance payments and other employee-related costs that will be paid during the fourth quarter of 2022 and the first quarter of 2023. The estimates of costs that the Company expects to incur in connection with the reduction in force plan are subject to a number of assumptions and actual results may differ materially. The Company may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the workforce reduction. We expect to devote substantial time and resources to exploring strategic alternatives in order to maximize stakeholder value, but there can be no assurance that this strategic alternative review process will result in us pursuing any transaction or that any transaction, if pursued, will be completed on attractive terms or at all. Additionally, there can be no assurances that any particular course of action, business arrangement or transaction, or series of transactions, will be pursued, successfully consummated or lead to increased stakeholder value or any value to stockholders. Veverimer is a non-absorbed, 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.
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 through 2038 in
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least 2035 in
Veverimer drug substance manufacturing is conducted for us by
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, 2022 , we have primarily funded our operations through the sale of$152.4 million of convertible preferred stock, gross proceeds of$255.6 million ($237.7 million , net) from our initial public offering, or IPO, onJuly 2, 2018 , gross proceeds of$231.8 million ($217.9 million , net) from our underwritten public offering onApril 8, 2019 , issuance of$200.0 million aggregate principal amount of 3.50% convertible senior notes due 2027, or the Convertible Senior Notes, ($193.3 million , net) onMay 22, 2020 , gross proceeds of$42.0 million ($41.5 million , net) from our Registered Direct Equity Financing onNovember 15, 2021 and gross borrowings of$75.0 million ($72.1 million , net) under the Loan and Security Agreement, or 2018 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$25.8 million and$39.7 million for the three months endedSeptember 30, 2022 and 2021, respectively, and$83.9 million and$126.6 million for the nine months endedSeptember 30, 2022 and 2021, respectively. As ofSeptember 30, 2022 , we had an accumulated deficit of$882.0 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. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. 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:
•explore strategic alternatives related to 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.
Our failure to successfully implement a strategic alternative would have a negative impact on our financial condition. We believe that our existing cash, cash equivalents and investments are not likely to be sufficient to fund our operations through the second quarter of 2023.
Components of Our Results of Operations
As discussed above, onNovember 8, 2022 , we put into place a reduction in force plan which includes an approximate 57.0% reduction in workforce inNovember 2022 . We estimate aggregate costs of approximately$2.0 million , recorded primarily in the fourth quarter of 2022, related to one-time termination severance payments and other employee-related costs that will be paid during the fourth quarter of 2022 and the first quarter of 2023. Expenses related to the reduction in force will be recorded in operating expenses as part of research and development expense and general and administrative expense as appropriate.
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 clinical research organizations, or 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; 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.
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All of our research and development expense to date has been incurred in
connection with veverimer. The process of conducting clinical studies necessary
to obtain regulatory approval is costly and time consuming and the continued
development, if any, of veverimer is 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 stakeholder return from
strategic alternatives related to veverimer. Therefore, we are unable to
estimate with any certainty the costs we will incur as we explore strategic
alternatives related to veverimer. We continue to evaluate all potential
strategic options for the Company, including a sale of the Company or its
assets, a merger, reverse merger, wind-down, liquidation and dissolution or
other strategic transaction but we may never succeed in recognizing value from
our research and development efforts.
General and Administrative Expense
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. Results of Operations
The following table presents our results of operations for the three and nine
months ended
Three Months Ended Nine Months Ended
September 30, Change September 30, Change
(in thousands) 2022 2021 $ % 2022 2021 $ %
Operating expenses:
Research and development $ 19,935 $ 26,635 $ (6,700) (25) % $ 55,298 $ 78,591 $ (23,293) (30) %
General and administrative 4,125 9,052 (4,927) (54) % 23,119 28,497 (5,378) (19) %
Total operating expenses 24,060 35,687 (11,627) (33) % 78,417 107,088 (28,671) (27) %
Loss from operations (24,060) (35,687) 11,627 (33) % (78,417) (107,088) 28,671 (27) %
Other income (expense), net 277 6 271 N/M 408 155 253 163 %
Interest expense (1,978) (3,994) 2,016 (50) % (5,927) (13,533) 7,606 (56) %
Loss on early extinguishment of
2018 Term Loan - - - N/M - (6,124) 6,124 (100) %
Net loss $ (25,761) $ (39,675) $ 13,914 (35) % $ (83,936) $ (126,590) $ 42,654 (34) %
N/M = Not meaningful
Research and Development Expense
The following table presents our research and development expense for the three
months ended
Three Months Ended
September 30, Change
(in thousands) 2022 2021 $ %
Clinical development costs $ 18,062 $ 20,060 $ (1,998) (10) %
Personnel and related costs 636 2,880 (2,244) (78) %
Stock-based compensation expense 339 2,819 (2,480) (88) %
Other research and development costs 898 876
22 3 %
Total research and development expense
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Research and development expense was $19.9 million and $26.6 million for the
three months ended September 30, 2022 and 2021, respectively. The decrease of
$6.7 million was primarily due to decreased activities in connection with our
veverimer clinical development program, resulting in a decrease in clinical
development costs of $2.0 million related to drug substance manufacturing costs
and other clinical trial costs related to our VALOR-CKD trial following the
administrative stop announced in May 2022 , a decrease in personnel and related
costs of $2.2 million related to lower bonus expense and a decrease in
stock-based compensation expense of $2.5 million related to performance awards.
The following table presents our research and development expense for the nine
months ended
Nine Months Ended
September 30, Change
(in thousands) 2022 2021 $ %
Clinical development costs $ 39,977 $ 58,855 $ (18,878) (32) %
Personnel and related costs 6,462 9,160 (2,698) (29) %
Stock-based compensation expense 6,132 7,948 (1,816) (23) %
Other research and development costs 2,727 2,628
99 4 %
Total research and development expense
Research and development expense was$55.3 million and$78.6 million for the nine months endedSeptember 30, 2022 and 2021, respectively. The decrease of$23.3 million was primarily due to decreased activities in connection with our veverimer clinical development program, resulting in a decrease of clinical development costs of$18.9 million related to drug substance manufacturing costs and other clinical trial costs related to our VALOR-CKD trial following the administrative stop announced inMay 2022 , a decrease in personnel and related costs of$2.7 million related to lower bonus expense and a decrease in stock-based compensation expense of$1.8 million primarily related to performance awards and awards fully vested in 2021.
General and Administrative Expense
The following table presents our general and administrative expense for the
three months ended
Three Months Ended
September 30, Change
(in thousands) 2022 2021 $ %
Personnel and related costs $ 442 $ 2,255 $ (1,813) (80) %
Stock-based compensation expense 448 3,830 (3,382) (88) %
Other general and administrative costs 3,235 2,967 268 9 %
Total general and administrative expense $ 4,125 $ 9,052 General and administrative expense was$4.1 million and$9.1 million for the three months endedSeptember 30, 2022 and 2021, respectively. The decrease of$4.9 million was primarily due to a decrease in personnel and related costs of$1.8 million due to lower bonus expense and a decrease in stock-compensation expense of$3.4 million related to performance awards, partially offset by an increase in other general and administrative costs of$0.3 million related to pre-commercialization activities, partially offset by a reduction in legal costs.
The following table presents our general and administrative expense for the nine
months ended
Nine Months Ended
September 30, Change
(in thousands) 2022 2021 $ %
Personnel and related costs $ 5,119 $ 7,097 $ (1,978) (28) %
Stock-based compensation expense 8,250 11,352 (3,102) (27) %
Other general and administrative costs 9,750 10,048
(298) (3) %
Total general and administrative expense
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General and administrative expense was $23.1 million and $28.5 million for the
nine months ended September 30, 2022 and 2021, respectively. The decrease of
$5.4 million was primarily due to a decrease in personnel and related costs of
$2.0 million due to lower bonus expense, a decrease in stock-compensation
expense of $3.1 million related to performance awards and a decrease in other
general and administrative costs of $0.3 million , primarily related to a
reduction in legal and finance costs, partially offset by an increase in
pre-commercialization costs.
Non-Operating Income (Expense)
The following table presents our non-operating income (expense) for the three
months ended
Three Months Ended
September 30, Change
(in thousands) 2022 2021 $ %
Other income (expense), net $ 277 $ 6 $ 271 N/M
Interest expense (1,978) (3,994) 2,016 (50) %
N/M = Not meaningful
Other income (expense), net increased by $0.3 million for the three months ended
September 30, 2022 , due primarily to higher interest income from investments.
Interest expense decreased $2.0 million for the three months ended September 30,
2022 , due the effect of the adoption 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, on January
1, 2022 , which resulted in reduced non-cash interest expense previously
associated with the equity component of the Convertible Senior Notes.
The following table presents our non-operating income (expense) for the nine
months ended
Nine Months Ended
September 30, Change
(in thousands) 2022 2021 $ %
Other income (expense), net $ 408 $ 155 $ 253 163 %
Interest expense (5,927) (13,533) 7,606 (56) %
Loss on early extinguishment of 2018 Term Loan - (6,124) 6,124 (100) %
Other income (expense), net increased by $0.3 million for the nine months ended
September 30, 2022 , due to foreign exchange losses on payments made in 2021 and
an increase in interest income from investments, partially offset by changes in
compound derivative liability. Interest expense decreased $7.6 million for the
nine months ended September 30, 2022 , due the effect of the adoption ASU No.
2020-06 on January 1, 2022 , which resulted in reduced non-cash interest expense
previously associated with the equity component of the Convertible Senior Notes
and the repayment of the 2018 Term Loan in March 2021 . The loss on early
extinguishment of 2018 Term Loan of $6.1 million was recognized in March 2021 on
repayment of the 2018 Term Loan.
Liquidity and Capital Resources
Sources of Liquidity
From our inception in 2013 throughSeptember 30, 2022 , we have primarily funded our operations through the sale of$152.4 million of convertible preferred stock, gross proceeds of$255.6 million ($237.7 million , net) from our IPO onJuly 2, 2018 , gross proceeds of$231.8 million ($217.9 million , net) from our underwritten public offering onApril 8, 2019 , issuance of$200.0 million Convertible Senior Notes ($193.3 million , net) onMay 22, 2020 , gross proceeds of$42.0 million ($41.5 million , net) from our Registered Direct Equity Financing onNovember 15, 2021 and gross borrowings of$75.0 million ($72.1 million , net) under the 2018 Term Loan entered into with Hercules onFebruary 28, 2018 . As ofSeptember 30, 2022 , we had cash, cash equivalents and investments of$80.2 million . We believe that our cash, cash equivalents and investments of$80.2 million as ofSeptember 30, 2022 , will allow us to continue funding our operations through the first quarter of 2023. As discussed above, onNovember 8, 2022 , we put into place a reduction in force plan which includes an approximate 57.0% reduction in workforce in 19
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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. Net proceeds from the offering were$193.3 million after deducting underwriting discounts, 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 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 provide 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. As ofSeptember 30, 2022 , the "if-converted value" did not exceed the remaining principal amount of the Convertible Senior Notes.
Registered Direct Equity Financing
OnNovember 15, 2021 , we consummated a registered direct equity financing pursuant to which we sold an aggregate of 4,666,667 shares of our common stock, pre-funded warrants to purchase up to 2,333,333 shares of our common stock and common warrants to purchase up to 7,000,000 shares of our common stock. Each share of common stock and accompanying common warrant and each pre-funded warrant and accompanying common warrant were sold together at a combined offering price of$6.00 . The pre-funded warrants were immediately exercisable at a nominal exercise price of$0.001 . The common warrants are exercisable at an exercise price of$11.00 on or afterMay 15, 2022 . Net proceeds were approximately$41.5 million , after deducting offering costs of$0.5 million . The pre-funded warrants were exercised in full onOctober 24, 2022 . The common warrants are exercisable until the earliest of: (a)November 15, 2024 , (b) immediately prior to the closing of certain fundamental transactions or (c) five business days after written notice following the earliest of: (i) submission of the New Drug Application for veverimer with theU.S. Food and Drug Administration , or (ii) the date that both of the following have occurred: (x) six weeks following the issuance of a press release reporting the results of the primary analysis of the VALOR-CKD trial and (y) one of the following: (aa) the completion of a common stock financing resulting in not less than$75.0 million in gross proceeds at an offering price of not less than$13.50 per share, or (bb) the volume weighted average share price of our common stock is greater than$15.00 per share with certain multiple-day trading volume requirements.
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, 2022 , we had an accumulated deficit of$882.0 million . Existing cash, cash equivalents and investments are not likely to be sufficient to fund our operations through the second quarter of 2023 as we expect to incur additional losses in the future.
Such future capital requirements are difficult to forecast and will depend on many factors, including:
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--------------------------------------------------------------------------------•the cost related to maintaining operational, financial and management information systems to support ongoing operations, including operating as a public company;
•the cost related to exploring strategic alternatives related to veverimer;
•the cost associated with any wind-down, liquidation, dissolution or other strategic transaction;
•our ability to maintain and enforce our intellectual property rights and defend any intellectual property-related claims;
•the cost of servicing our Convertible Senior Notes; and
•the cost of fulfilling our minimum contractual obligations to our suppliers and vendors.
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. We expect to fund current operations out of cash on hand. 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 and delay operating expenses, 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. Cash Flows
The following table presents a summary of the net cash flow activity for the
nine months ended
Nine Months Ended
September 30,
(in thousands) 2022 2021
Net cash provided by (used in):
Operating activities $ (70,731) $ (101,996)
Investing activities 66,860 63,988
Financing activities 502 (82,861)
Net decrease in cash and cash equivalents
Cash Used in Operating Activities
During the nine months endedSeptember 30, 2022 , cash used in operating activities was$70.7 million , which consisted of a net loss of$83.9 million , adjusted by non-cash charges of$15.0 million and changes in cash used in operating assets and liabilities of$1.8 million . Non-cash charges consisted primarily of stock-based compensation of$14.4 million , accretion of Convertible Senior Notes of$0.7 million and depreciation and amortization of$0.2 million , partially offset by net amortization of premiums and discounts on investments of$0.2 million . The changes in cash used in our operating assets and liabilities were primarily due to a decrease in accounts payable of$5.6 million , partially offset by a decrease in prepaid expenses and other assets of$2.7 million and an increase in accrued expenses and other liabilities of$1.1 million . 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 our operating assets and liabilities of$9.0 million . The non-cash charges consisted primarily of stock-based compensation of$19.3 million , accretion of Convertible Senior Notes and 2018 Term Loan of$7.0 million , loss on early extinguishment of 2018 Term Loan of$6.1 million , non-cash operating lease costs of$0.6 million , net amortization of premiums and discounts on investments of$0.4 million and depreciation and amortization of$0.4 21 -------------------------------------------------------------------------------- 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 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 .
Cash Provided by Investing Activities
Net cash provided by investing activities was$66.9 million and$64.0 million for the nine months endedSeptember 30, 2022 and 2021, respectively. Net cash provided by investing activities during the nine months endedSeptember 30, 2022 was due to proceeds from maturities of investments of$142.5 million , partially offset by purchases of investments of$75.6 million . Net cash provided by investing activities during the nine months endedSeptember 30, 2021 was due to proceeds from 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 .
Cash Provided by (Used in) Financing Activities
Net cash provided by financing activities was$0.5 million for the nine months endedSeptember 30, 2022 and net cash used in financing activities was$82.9 million for the nine months endedSeptember 30, 2021 . Net cash provided by financing activities during the nine months endedSeptember 30, 2022 was primarily due to proceeds from issuance of common stock under equity incentive plans of$0.7 million , partially offset by payments for taxes related to net share settlement of equity awards of$0.2 million . Net cash used in financing activities during the nine months endedSeptember 30, 2021 was primarily due to cash paid for early extinguishment of 2018 Term Loan of$83.3 million , partially offset by proceeds from the issuance of common stock under equity incentive plans of$0.5 million .
Contractual Obligations and Commitments
We have contractual obligations relating to our manufacturing and service contracts, Convertible Senior Notes, lease obligations and other research and development activities. We also enter into other contracts in the normal course of business with CROs, contract development and manufacturing organizations and other service providers and vendors. These contracts generally provide for termination on short notice and are cancelable contracts. Our existing cash, cash equivalents and investments as ofSeptember 30, 2022 are not likely to be sufficient to meet our contractual obligations through the second quarter of 2023, as we expect to incur additional losses in the future due to current contractual obligations and recognize that we will need to raise additional capital to continue operations.
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 as of 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. There were no changes in our critical accounting policies and estimates, as compared to our Annual Report on Form 10-K for the year endedDecember 31, 2021 , except as described below.
Stock-Based Compensation
Stock-based compensation expense for stock options with performance conditions
is recognized over the estimated service period required to meet
performance-based targets using an accelerated attribution method when achieving
the performance-based targets is deemed probable. When estimating the service
period we make subjective assumptions about the probability and timing of
achieving these performance-based targets. Due to the outcome of the VALOR-CKD
trial, we reassessed the vesting of performance-based awards unvested as of
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September 30, 2022 , as improbable of achievement. As a result, we reversed the
related cumulative stock-based compensation expense in the three months ended
September 30, 2022 .
Restructuring
On November 8, 2022 , we put into place a reduction in force plan which includes
an approximate 57.0% reduction in workforce in the fourth quarter of 2022. We
estimate aggregate costs of approximately $2.0 million , recorded primarily in
the fourth quarter of 2022, related to one-time termination severance payments
and other employee-related costs that will be paid during the fourth quarter of
2022 and the first quarter of 2023. The estimates of costs that we expect to
incur in connection with the reduction in force plan are subject to a number of
assumptions and actual results may differ materially. We may also incur
additional costs not currently contemplated due to events that may occur as a
result of, or that are associated with, the workforce reduction. For example, if
the termination provisions are triggered in our manufacturing agreement with
Patheon, we may become liable for a termination payment. In addition, if we take
steps to terminate or sublease our leased facilities, we may incur a loss on the
exit of the lease. We may also incur impairment charges related to long-lived
assets as well as prepaid and other assets.
Actual results may differ significantly from these estimates under different
assumptions or conditions. For additional information about our critical
accounting estimates refer to Part II, Item 7., "Critical Accounting Policies
and Significant Judgments and Estimates" in our Annual Report on Form 10-K for
the year ended December 31, 2021 .
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