Tricida, Inc. – Clinical-Stage Biopharmaceutical Company Files for Bankruptcy After Disappointing Trial Results for Its Single Drug Candidate; Will Look to Re-Boot Failed Out-of-Court Sales Effort

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January 11, 2023 – Tricida, Inc. (NASDAQ: TCDA; "Tricida" or the “Debtor”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, case number 23-10024 (Judge TBA). The Debtor, a clinical-stage biopharmaceutical company*, is represented by Sean Beach of Young Conway Stargatt & Taylor, LLP. Further board-authorized engagements include: (i) Sidley Austin LLP as general bankruptcy counsel, (ii) SierraConstellation Partners as financial advisors (SierraConstellation's Lawrence Perkins drafts the Declaration although not specifically named as CRO), (iii) Stifel, Nicolaus & Company, Inc. and its wholly-owned advisory and investment banking firm Miller Buckfire, LLC (collectively, “Stifel-MB”) as investment bankers and (iv) KCC as claims agent. 

*Founded in 2013, Tricida is a clinical-stage pharmaceutical company focused on the development and commercialization of veverimer, a drug designed to slow the progression of CKD through the treatment of chronic metabolic acidosis. Veverimer is Tricida’s only investigational drug candidate. Tricida has incurred losses in each year since its inception in 2013, with substantially all of its operating losses resulting from expenses incurred in connection with advancing veverimer through development activities and general and administrative costs associated with pre-commercialization activities and administrative functions. As of September 30, 2022, Tricida had an accumulated deficit of $882.0mn.

The Debtors’ lead petition notes between 200 and 1,000 creditors; estimated assets of $93.9mn; and estimated liabilities of $230.0mn ($204.5mn of funded debt, ie the Debtor's 2027 convertible notes), with each of the A&L figures as of September 30, 2022, 10-Q here). Documents filed with the Court list the Debtor's three largest unsecured creditors as (i) Patheon Austria GmbH & Co KG ($20.5mn disputed, contingent vendor claim), (ii) Worldwide Clinical Trials Ltd ($2.1mn clinical vendor claim) and (iii) Pharmaceutical Research Associates Inc., dba ICON plc ($1.4mn clinical vendor claim).

Highlights

  • Clinical-Stage Biopharmaceutical Company Files for Chapter 11 after Disappointing Trial of Its Single Drug Candidate (Vevimeer, Developed to Treat Chronic Kidney Disease) 
  • Perenially Loss-Making Debtor Files with Accumulated Deficit of $882.0mn
  • Files with $204.5mn of Funded Debt in Respect of 2027 Convertible Notes and $140.0mn of Trade/Unsecured Debt
  • Out-of-Court Marketing Effort Comes Up Short, with Debtor to Push for Re0Booted, Expedited Sale in Chapter 11
  • 80% of Convertible Noteholders Sign Up to RSA

Restructuring Support Agreement (Attached at Exhibit A of Docket No. 2, see also the 8-K)

On January 11, 2023, Tricida executed a Restructuring Support Agreement, or "RSA," with holders holding in excess of 80% of the aggregate amount of the Tricida’s 3.50% Convertible Senior Notes due 2027 (the “Notes”).

The Restructuring Support Agreement includes milestones designed to facilitate an expedited sale process meant to maximize the value of the Company’s assets while preserving cash for the benefit of the Company’s estate and its creditors. In furtherance of this goal, the Restructuring Support Agreement milestones commit the Company to certain case milestones, including, among others, the filing of a motion to approve sale, bidding, and notice procedures on the petition date, as well as a timeline for filing of a disclosure statement and liquidating plan, the entry of an order approving bid procedures, a qualified bid deadline, an auction, if multiple bids are received, the entry of an order approving the sale, and the entry of an order confirming a plan. 

In addition, the Restructuring Support Agreement establishes a process for the implementation of the liquidating plan through the creation of a liquidating trust and sets up a general framework for the treatment of claims against and equity interests in the Company.

Events Leading to the Chapter 11 Filing

In a declaration in support of first day filings (the “Perkins Declaration”) [Docket No. 2], Sierra's Lawrence Perkins, provides: “Tricida experienced a significant setback in its development and commercialization of Veverimer [NB: Veverimer is Tricida’s only investigational drug candidate] in late October 2022 when it announced the top-line results from its VALOR-CKD renal outcomes clinical trial ('VALOR-CKD'). Critically, this 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 a confirmed greater than or equal to 40% reduction in estimated glomerular filtration rate ('eGFR'), also known as DD40. 

While VALOR-CKD reinforced veverimer’s excellent safety profile, the inability to demonstrate the required efficacy in slowing CKD progression during the VALOR-CDK trial effectively eliminated Tricida’s ability to obtain additional funding, limiting go-forward operations and Tricida’s ability to run additional trials. Although Tricida believes both that the VALOR-CKD trial provides information that can be used to design a pivotal trial with a higher probability of success and that veverimer has robust future development opportunities, the Company’s lack of capital has forced Tricida to explore financial and strategic alternatives to maximize the value of its existing assets."

Marketing Efforts

The Perkins Declaration provides: "…on November 2, 2022 [ie after announced trial results], Tricida announced to the public that it had engaged Stifel-MB. In the week following its engagement, Stifel-MB met repeatedly with Tricida’s management team to conduct diligence on the assets, develop a targeted buyer list, prepare marketing materials and a non-confidential presentation for potential purchasers, and develop a communication strategy meant to attract the attention of strategically positioned buyers. Stifel-MB contacted or received inbound interest from approximately 53 strategic and financial parties regarding a potential transaction, primarily comprising large-cap and mid-cap public and private companies with strategic interests in nephrology or renal and metabolic therapeutic categories. With respect to this outreach process, Stifel-MB prioritized parties with both adequate commercial infrastructure and drug development capabilities along with sufficient capital resources—or a reasonable likelihood of being able to obtain such capital—to consummate a transaction that would maximize the value of the Debtor or its assets. These parties were provided non-confidential presentation materials prepared by the Debtor (disclosed in an 8-K filed on November 17, 2022); certain confidential information (including access to a virtual data room) was provided to those parties who executed a non-disclosure agreement.

Despite the best efforts of the Debtor and its advisors, the strategic alternative exploration and evaluation process—including the marketing process—failed to identify a stalking horse or produce a satisfactory offer to purchase the Debtor or its assets. Without a clear out-of court solution to maximize value, the Debtor pivoted to preparing for a chapter 11 filing and auction under section 363 of the Bankruptcy Code."

Prepetition Indebtedness

As of the Petition date, Tricida has approximately $204.5mn in total funded debt obligations under the Convertible Notes, including accrued but unpaid interest. Tricida has no secured debt.

As of the Petition date, Tricida estimates that amounts in excess of $140.0mn in claims may be asserted by trade and other general unsecured creditors against Tricida. These amounts consist primarily of contract termination damages asserted by Patheon in its December 19, 2022 letter and accounts payable to various trade creditors, utility providers, and Tricida’s landlord.

About the Debtors

According to the Debtors: “Tricida, Inc. is a pharmaceutical company focused on the development and commercialization of its investigational drug candidate, veverimer, a non-absorbed, orally-administered polymer designed to slow CKD progression in patients with metabolic acidosis and CKD. Tricida recently completed a renal outcomes clinical trial, VALOR-CKD, to determine if veverimer slows CKD progression in patients with metabolic acidosis associated with CKD. Metabolic acidosis is a serious condition commonly caused by CKD that is believed to accelerate the progression of kidney deterioration. It is estimated to pose a health risk to approximately 4.3 million patients with CKD in the United States. There are currently no therapies approved by the FDA to slow progression of kidney disease by correcting chronic metabolic acidosis in patients with CKD. ”

The Perkins Declaration adds: "Tricida is a clinical-stage pharmaceutical company aimed at slowing the progression of chronic kidney disease (“CKD”) through the treatment of metabolic acidosis by its investigational drug candidate, veverimer (also known as TRC101). Tricida planned to develop and commercialize veverimer as the first and only FDA-approved therapy for slowing CKD progression through the treatment of chronic metabolic acidosis in patients with CKD. Veverimer is Tricida’s only investigational drug candidate.

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