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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-38558
https://cdn.kscope.io/f3be9b9ac7639f2b332f8bed53e4922f-tcda-20200630_g1.jpg
TRICIDA, INC.
(Exact name of registrant as specified in its charter)
Delaware46-3372526
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
7000 Shoreline Court, Suite 201, South San Francisco, CA 94080
(Address of principal executive offices, including zip code)
(415) 429-7800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act
Title of each classTrading Symbol(s)Name of exchange on which registered
Common stock, par value $0.001 per shareTCDAThe Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
On July 31, 2020, the registrant had 50,048,972 shares of common stock, par value $0.001 per share, outstanding.



TABLE OF CONTENTS
Note Regarding Forward-Looking Statements
Part I. Financial Information
Item 1.Financial Statements (Unaudited):
Condensed Balance Sheets as of June 30, 2020 and December 31, 2019
Condensed Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2020 and 2019
Condensed Statements of Stockholders’ Equity for the three and six months ended June 30, 2020 and 2019
Condensed Statements of Cash Flows for the six months ended June 30, 2020 and 2019
Notes to Condensed Financial Statements
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures about Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits
Signatures




NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Forward-looking statements generally can be identified by words such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:
estimates of our expenses, capital requirements and our needs for additional financing;
the prospects of veverimer (also known as TRC101), our only product candidate, which is still in development;
our ability to obtain approval of our New Drug Application, or NDA, for veverimer from the U.S Food and Drug Administration, or FDA, under the Accelerated Approval Program;
our ability to resolve the deficiencies identified by the FDA in our NDA for veverimer;
our expectations regarding the timing of the completion of our nonclinical studies;
the design of our ongoing confirmatory postmarketing trial, VALOR-CKD, including the sample size, trial duration, endpoint definition, event rate assumptions and eligibility criteria;
our expectations regarding the timing of the enrollment, completion and reporting of our confirmatory postmarketing trial, VALOR-CKD;
the outcome and results of our VALOR-CKD trial;
the market acceptance or commercial success of veverimer, if approved, and the degree of acceptance among physicians, patients, patient advocacy groups, health care payers and the medical community;
our expectations regarding competition, potential market size and the size of the patient population for veverimer, if approved for commercial use;
our expectations regarding our ability to draw under our credit facility with Hercules Capital, Inc. and Hercules Technology III, L.P.;
our expectations regarding the safety, efficacy and clinical benefit of veverimer;
our ability to achieve and maintain regulatory approval of veverimer, and any related requirements, restrictions, limitations and/or warnings in the label of veverimer;
our sales, marketing or distribution capabilities and our ability to commercialize veverimer, if we obtain regulatory approval;
our current and future agreements with third parties in connection with the manufacturing, commercialization, packaging and distribution of veverimer;
our expectations regarding the ability of our contract manufacturing partners to produce veverimer in the quantities and timeframe that we will require;
our expectations regarding our future costs of goods;
our ability to attract, retain and motivate key personnel and increase the size of our organization;
the scope of protection we are able to establish and maintain for intellectual property rights covering veverimer;

1


potential claims relating to our intellectual property and third-party intellectual property;
the duration of our intellectual property estate that will provide protection for veverimer;
our ability to establish collaborations in lieu of obtaining additional financing;
the potential impact of pandemics, including the recent 2019 novel coronavirus disease, or COVID-19, caused by the severe acute respiratory coronavirus 2, or SARS-CoV-2, on the financial markets in general and on our business in particular; and
our financial performance.
These forward-looking statements are based on management’s current expectations, estimates, forecasts, and projections about our business and the industry in which we operate and management’s beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed in Item 1A. “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Investors in our securities are urged to consider these factors carefully in evaluating the forward-looking statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. Investors in our securities should, however, review the factors and risks we describe in the reports we will file from time to time with the Securities and Exchange Commission after the date of this Quarterly Report on Form 10-Q.

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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRICIDA, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share amounts)
June 30,
2020
December 31, 2019
 
Assets
Current assets:
Cash and cash equivalents$41,900  $18,574  
Short-term investments345,632  289,424  
Prepaid expenses and other current assets9,830  4,744  
Total current assets397,362  312,742  
Long-term investments49,371  46,980  
Property and equipment, net1,432  2,728  
Operating lease right-of-use assets8,734  9,376  
Total assets$456,899  $371,826  
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$5,839  $5,911  
Current operating lease liabilities1,088  1,072  
Current Term Loan6,784    
Accrued expenses and other current liabilities20,769  32,780  
Total current liabilities34,480  39,763  
Non-current Term Loan, net67,952  58,374  
Convertible Senior Notes, net114,645    
Non-current operating lease liabilities8,515  8,783  
Other long-term liabilities327  1,023  
Total liabilities225,919  107,943  
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.001 par value; 40,000,000 shares authorized, no shares issued or outstanding as of June 30, 2020 and December 31, 2019
    
Common stock, $0.001 par value; 400,000,000 shares authorized as of June 30, 2020 and December 31, 2019; 50,039,587 and 49,763,176 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively.
50  50  
Additional paid-in capital731,358  632,647  
Accumulated other comprehensive income (loss)863  193  
Accumulated deficit(501,291) (369,007) 
Total stockholders’ equity230,980  263,883  
Total liabilities and stockholders’ equity$456,899  $371,826  
See accompanying notes to condensed financial statements (unaudited).

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TRICIDA, INC.
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(in thousands, except share and per share amounts)
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2020201920202019
Operating expenses:
Research and development$28,757  $28,976  $78,138  $60,399  
General and administrative28,418  8,861  51,944  15,213  
Total operating expenses57,175  37,837  130,082  75,612  
Loss from operations(57,175) (37,837) (130,082) (75,612) 
Other income (expense), net2,675  2,602  3,488  3,869  
Interest expense(3,756) (1,391) (5,776) (2,780) 
Loss before income taxes(58,256) (36,626) (132,370) (74,523) 
Income tax benefit86    86    
Net loss(58,170) (36,626) (132,284) (74,523) 
Other comprehensive income (loss):
Net unrealized gain (loss) on available-for-sale investments, net of tax902  480  670  782  
Total comprehensive loss$(57,268) $(36,146) $(131,614) $(73,741) 
Net loss per share, basic and diluted$(1.16) $(0.75) $(2.65) $(1.64) 
Weighted-average number of shares outstanding, basic and diluted49,960,072  48,674,238  49,900,739  45,489,861  
See accompanying notes to condensed financial statements (unaudited).

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TRICIDA, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
 Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders’ Equity
 SharesAmount
Balance at December 31, 2019
49,763,176  $50  $632,647  $193  $(369,007) $263,883  
Issuance of common stock under equity incentive plans150,056    550  —  —  550  
Stock-based compensation—  —  8,374  —  —  8,374  
Net unrealized gain (loss) on available-for-sale investments, net of tax—  —  —  (232) —  (232) 
Net loss—  —  —  —  (74,114) (74,114) 
Balance at March 31, 202049,913,232  50  641,571  (39) (443,121) 198,461  
Equity component of Convertible Senior Notes, net of underwriter discounts and issuance costs—  —  79,498  —  —  79,498  
Issuance of warrants in connection with Term Loan—  —  112  —  —  112  
Issuance of common stock under equity incentive plans126,355  —  1,098  —  —  1,098  
Stock-based compensation—  —  9,079  —  —  9,079  
Net unrealized gain (loss) on available-for-sale investments, net of tax—  —  —  902  —  902  
Net loss—  —  —  —  (58,170) (58,170) 
Balance at June 30, 202050,039,587  $50  $731,358  $863  $(501,291) $230,980  

 Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders’ Equity
 SharesAmount
Balance at December 31, 2018
42,148,247  $42  $386,830  $(153) $(192,194) $194,525  
Issuance of warrant in connection with Term Loan—  —  284  —  —  284  
Issuance of common stock under equity incentive plans527,859  1  736  —  —  737  
Stock-based compensation—  —  2,658  —  —  2,658  
Net unrealized gain (loss) on available-for-sale investments—  —  —  302  —  302  
Net loss—  —  —  —  (37,897) (37,897) 
Balance at March 31, 201942,676,106  43  390,508  149  (230,091) 160,609  
Issuance of common stock in connection with public offering, net of underwriter discounts and issuance costs6,440,000  6  217,003  —  —  217,009  
Issuance of common stock under equity incentive plans160,339  —  959  —  —  959  
Stock-based compensation—  —  4,413  —  —  4,413  
Net unrealized gain (loss) on available-for-sale investments—  —  —  480  —  480  
Net loss—  —  —  —  (36,626) (36,626) 
Balance at June 30, 201949,276,445  $49  $612,883  $629  $(266,717) $346,844  
See accompanying notes to condensed financial statements (unaudited).

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TRICIDA, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 Six Months Ended
June 30,
 20202019
Operating activities:
Net loss$(132,284) $(74,523) 
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization474  341  
Non-cash operating lease costs390  413  
Accretion (amortization) of premiums and discounts on investments(417) (2,031) 
Accretion of Term Loan and Convertible Senior Notes2,331  1,011  
Stock-based compensation17,453  7,071  
Changes in fair value of compound derivative liability
(650) 165  
Other non-cash items(86)   
Changes in operating assets and liabilities:
Prepaid expenses and other assets(5,113) (1,393) 
Accounts payable(113) (3,785) 
Accrued expenses and other liabilities(10,623) 16,240  
Operating lease liabilities  (438) 
Net cash used in operating activities(128,638) (56,929) 
Investing activities:
Purchases of investments(229,289) (299,085) 
Maturities of investments171,955  127,557  
Purchases of property and equipment(600) (1,021) 
Net cash used in investing activities(57,934) (172,549) 
Financing activities:
Proceeds from equity offerings, net  217,930  
Payments of equity offering costs  (921) 
Proceeds from issuance of common stock under equity incentive plans1,670  1,608  
Proceeds from Convertible Senior Notes, net193,285    
Repayment of leasehold improvement loan(28) (65) 
Proceeds (payments) under Term Loan, net14,971  (1,449) 
Net cash provided by financing activities209,898  217,103  
Net increase (decrease) in cash and cash equivalents23,326  (12,375) 
Cash and cash equivalents at beginning of period18,574  37,172  
Cash and cash equivalents at end of period$41,900  $24,797  
Supplemental disclosures
Cash paid for interest$2,536  $1,650  
Supplemental disclosures of non-cash investing and financing activities
Warrants related to Term Loan$112  $284  
Purchases of property and equipment included in accounts payable and accrued expenses$428  $24  
See accompanying notes to condensed financial statements (unaudited).

6


TRICIDA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
Organization—Tricida, Inc., or the Company, was incorporated in the state of Delaware on May 22, 2013 and was granted its certification of qualification in the state of California on August 5, 2013, or inception. The Company is focused on the development and commercialization of its drug candidate, veverimer (also known as TRC101), a non-absorbed, orally-administered polymer designed to treat metabolic acidosis in patients with chronic kidney disease.
The Company has sustained operating losses and expects such annual losses to continue over the next several years. The Company’s ultimate success depends on the outcome of its research and development and commercialization activities for veverimer, for which it expects to incur additional losses in the future. Through June 30, 2020, the Company has relied primarily on the proceeds from equity offerings and debt financing to finance its operations.
The Company recognizes that it may need to raise additional capital to fully implement its business plan, and if market conditions are favorable or if the Company identifies specific strategic opportunities or needs, intends to do so through the issuance of equity, borrowings, or strategic alliances with partner companies. However, if such financing is not available at adequate levels or on reasonable terms, the Company will need to reevaluate its operating plans and could be required to significantly reduce operating expenses and delay, reduce the scope of or eliminate some of its development programs or its future commercialization efforts, out-license intellectual property rights to its product candidates and sell unsecured assets, or a combination of the above, any of which may have a material adverse effect on its business, results of operations, financial condition and/or its ability to fund its scheduled obligations on a timely basis or at all.
Basis of Presentation—The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The condensed balance sheet as of June 30, 2020, the condensed statements of operations and comprehensive loss for the three and six months ended June 30, 2020 and 2019, the condensed statements of stockholders' equity for the three and six months ended June 30, 2020 and 2019 and the condensed statements of cash flows for the six months ended June 30, 2020 and 2019 are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The condensed balance sheet at December 31, 2019 has been derived from audited financial statements.
Although the Company believes that the disclosures in these financial statements are adequate to make the information presented not misleading, certain information and footnote information normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission.
Results for any interim period are not necessarily indicative of results for any future interim period or for the entire year. The accompanying financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
With the exception of the change for the accounting of credit losses as a result of the adoption of Accounting Standards Update, or ASU, 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or ASU 2016-13, there have been no new or material changes to the significant accounting policies discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, that are of significance, or potential significance, to the Company.
Credit Losses
The Company is exposed to credit losses primarily through its available-for-sale investments. The Company invests excess cash in marketable securities with high credit ratings that are classified in Level 1 and Level 2 of the

7


fair value hierarchy. The Company's investment portfolio at any point in time contains investments in U.S. treasury and U.S. government agency securities, taxable and tax-exempt municipal notes, corporate notes and bonds, commercial paper, non-U.S. government agency securities and money market funds, and are classified as available-for-sale. The Company assesses whether its available-for sale investments are impaired at each reporting period. Unrealized losses or impairments resulting from the fair value of the available-for-sale debt security being below the amortized cost basis are evaluated for identification of credit losses and non-credit related losses. Any credit losses are charged to earnings against the allowance for credit losses of the debt security, limited to the difference between the fair value and the amortized cost basis of the debt security. Any difference between the fair value of the debt security and the amortized cost basis, less the allowance for credit losses, are reported in other comprehensive income (loss). Expected cash inflows due to improvements in credit are recognized through a reversal of the allowance for credit losses subject to the total allowance previously recognized. The Company’s expected loss allowance methodology for the debt securities is developed by reviewing the extent of the unrealized loss, the size, term, geographical location, and industry of the issuer, the issuers’ credit ratings and any changes in those ratings, as well as reviewing current and future economic market conditions and the issuers’ current status and financial condition. The Company considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and determined that the estimate of credit losses was not significantly impacted. As of June 30, 2020, the Company has not recognized an allowance for expected credit losses related to available-for-sale investments as the Company has not identified any unrealized losses for these investments attributable to credit factors.
Recent Accounting Pronouncements
Adopted Standards
Effective January 1, 2020, the Company adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changed the impairment model for most financial assets and certain other instruments. The Company adopted ASU 2016-13 on January 1, 2020, using a modified retrospective transition method, which requires a cumulative-effect adjustment, if any, to the opening balance of retained earnings to be recognized on the date of adoption with prior periods not restated. The adoption of ASU 2016-13 did not have a significant impact on the Company's condensed financial statements. See "Credit Losses" above for a description of the Company's credit losses accounting policy.
Standards Not Yet Effective
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, or ASU 2019-12, which simplifies the accounting for income taxes. ASU 2019-12 is effective for public business entities for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2020 on a prospective basis, and early adoption is permitted. The Company does not expect the adoption of ASU 2019-12 will have a significant impact on its financial statements.
NOTE 3. FAIR VALUE MEASUREMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company’s financial assets and liabilities are determined in accordance with the fair value hierarchy established in the FASB's Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, or Topic 820. Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy of Topic 820 requires an entity to maximize the use of observable inputs when measuring fair value and classifies those inputs into three levels:
Level 1—Observable inputs, such as quoted prices in active markets;
Level 2—Inputs, other than the quoted prices in active markets, which are observable either directly or indirectly such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the instrument’s anticipated life; and
Level 3—Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

8


Our financial instruments consist primarily of cash and cash equivalents, short-term and long-term investments, accounts payable, the Loan and Security Agreement, or Term Loan, entered into with Hercules Capital Inc., or Hercules, and the Convertible Senior Notes.
Cash, cash equivalents and investments are reported at their respective fair values on the Company's condensed balance sheets. Where quoted prices are available in an active market, securities are classified as Level 1. The Company classifies money market funds and U.S. Treasury securities as Level 1. When quoted market prices are not available for the specific security, then the Company estimates fair value by using quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs obtained from various third-party data providers, including but not limited to benchmark yields, reported trades and broker/dealer quotes. Where applicable the market approach utilizes prices and information from market transactions for similar or identical assets. The Company classifies U.S. government agency securities, commercial paper, corporate debt securities and asset-backed securities as Level 2. The Company's short-term and long-term investments are classified as available-for-sale.
The following tables set forth the value of the Company's financial assets remeasured on a recurring basis based on the three-tier fair value hierarchy by significant investment category as of June 30, 2020 and December 31, 2019.
June 30, 2020
Reported as:
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair ValueCash and Cash EquivalentsShort-Term InvestmentsLong-Term Investments
Cash$2,428  $—  $—  $2,428  $2,428  $—  $—  
Level 1:
Money market funds28,476  —  —  28,476  28,476  —  —  
U.S. Treasury securities29,896  3    29,899    18,654  11,245  
Subtotal58,372  3    58,375  28,476  18,654  11,245  
Level 2:
U.S. government agency securities 43,883  3  (11) 43,875    5,749  38,126  
Commercial paper
181,997  351  (11) 182,337  10,996  171,341    
Corporate debt securities
149,088  806  (6) 149,888    149,888    
Subtotal374,968  1,160  (28) 376,100  10,996  326,978  38,126  
Total assets measured at fair value
$435,768  $1,163  $(28) $436,903  $41,900  $345,632  $49,371  


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December 31, 2019
Reported as:
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair ValueCash and Cash EquivalentsShort-Term InvestmentsLong-Term Investments
Cash$1,393  $—  $—  $1,393  $1,393  $—  $—  
Level 1:
Money market funds
17,181  —  —  17,181  17,181  —  —  
Level 2:
U.S. government agency securities40,741  6  (14) 40,733    19,990  20,743  
Commercial paper
108,248  107  (2) 108,353    108,353    
Corporate debt securities
185,569  205  (20) 185,754    159,517  26,237  
Asset-backed securities
1,561  3    1,564    1,564    
Subtotal336,119  321  (36) 336,404    289,424  46,980  
Total assets measured at fair value
$354,693  $321  $(36) $354,978  $18,574  $289,424  $46,980  
Interest income related to the Company's cash, cash equivalents and available-for-sale investments included in other income (expense), net was approximately $1.2 million and $2.7 million for the three months ended June 30, 2020 and 2019, respectively, and $2.9 million and $4.2 million for the six months ended June 30, 2020 and 2019, respectively. There were no gross realized gains and gross realized losses for the three and six months ended June 30, 2020 and 2019.
The following table summarizes the Company's available-for-sale investments that were in a continuous unrealized loss position but not deemed due to credit losses and therefore not required to be charged to earnings against the allowance for expected credit losses, as of June 30, 2020 and December 31, 2019.
June 30, 2020December 31, 2019
(in thousands)Fair ValueUnrealized LossesFair ValueUnrealized Losses
U.S. Treasury securities$11,245  $  $  $  
U.S. government agency securities27,125  (11) 24,235  (14) 
Commercial paper69,920  (11) 5,426  (2) 
Corporate debt securities8,494  (6) 38,668  (20) 
Total$116,784  $(28) $68,329  $(36) 
The Company held a total of 13 and 18 positions which were in an unrealized loss position as of June 30, 2020 and December 31, 2019, respectively. All available-for-sale investments in an unrealized loss position were in a continuous loss position for less than 12 months. The Company determined that there was no allowance for expected credit losses related to our available-for-sale investments as of June 30, 2020 because the Company does not intend to sell these securities nor does the Company believe that it will be required to sell these securities before the recovery of their amortized cost basis.
The following table summarizes the maturities of the Company’s cash equivalents (excluding money market funds) and available-for-sale investments, as of June 30, 2020.
(in thousands)Amortized CostFair Value
Mature in less than one year$355,483  $356,628  
Mature in one to five years49,381  49,371  
Total$404,864  $405,999  

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The following table presents a reconciliation of financial liabilities related to the compound derivative liability associated with the Term Loan measured at fair value on a recurring basis using Level 3 unobservable inputs for the six months ended June 30, 2020 and 2019.
Six Months Ended June 30,
20202019
(in thousands)Compound Derivative LiabilityCompound Derivative Liability
Fair value at beginning of period$977  $161  
Change in fair value(650) 165  
Fair value at end of period$327  $326  
The following table presents information about significant unobservable inputs related to the Company's Level 3 financial liabilities as of June 30, 2020.
June 30, 2020
(in thousands)Fair ValueValuation TechniqueSignificant Unobservable InputInput
Compound derivative liability$327  Discounted cash flowDiscount rate8.4 %
Probability of the occurrence of certain events
20.0 %
The estimated fair value of the Term Loan was $82.0 million as of June 30, 2020 and was classified as Level 3. The key valuation assumptions used consist of the discount rate of 8.4% and the probability of the occurrence of certain events of 20.0%. The estimated fair value of the Convertible Senior Notes was $209.9 million as of June 30, 2020 and they were classified as Level 3. The key valuation assumptions used consist of the discount rate of 10.7% and volatility of 48.0%.
NOTE 4. LEASES
The Company accounts for leases under ASU No. 2016-02, Leases (Topic 842), adopted as of January 1, 2019.
In July 2014, the Company entered into a five-year noncancelable operating lease for its offices and laboratory space in South San Francisco, California that was scheduled to expire in June 2019, with an option for the Company to extend the lease for an additional three years. In August 2017, the Company entered into an amendment which extended the existing operating lease to June 2021 and added 13,258 square feet of additional lease space resulting in a total of 26,987 square feet being leased in the aggregate under the amended lease. In November 2017, the Company entered into a second amendment which reduced the common areas resulting in a total of 26,897 square feet being leased in aggregate under the second amendment.
On August 14, 2019, the Company entered into a third amendment to the existing operating lease which will extend the leased space by an additional 19,177 square feet, or Second Expansion Premises, which will result in a total of 46,074 square feet being leased in aggregate. The operating lease for the Second Expansion Premises will commence on the date they are delivered to the Company, which is expected to be September 1, 2020, or the Second Expansion Premises Commencement Date. In conjunction with the third amendment, the Company also agreed to lease 5,569 square feet of temporary office space effective August 15, 2019 to the Second Expansion Premises Commencement Date. The third amendment will extend the lease by 84 months from the Second Expansion Premises Commencement Date, with an option to extend the lease for an additional 36 months subject to certain conditions. The Company determined that the Second Expansion Premises shall be accounted for as a new lease at the Second Expansion Premises Commencement Date. Further, the Company determined that the amendment to the existing operating lease and temporary office space shall be accounted as a lease modification upon execution of the third amendment. The Company recognized an operating lease ROU asset of $8.1 million and operating lease liability of $8.1 million on its condensed balance sheet upon the execution of the third amendment on August 14, 2019, and will measure and record an additional ROU asset and operating lease liability for the Second Expansion Premises upon the Second Expansion Premises Commencement Date.
Operating lease cost was $0.4 million and $0.3 million for the three months ended June 30, 2020 and 2019, respectively, and $0.9 million and $0.5 million for the six months ended June 30, 2020 and 2019, respectively. Variable lease cost was $0.1 million and $0.2 million for the three months ended June 30, 2020 and 2019,

11


respectively, and $0.3 million and $0.4 million for the six months ended June 30, 2020 and 2019, respectively. Operating cash flows for both the six months ended June 30, 2020 and 2019 included $0.5 million in cash payments for operating leases. Expenses related to short-term leases were not significant for the three and six months ended June 30, 2020 and 2019.
The following table presents the maturity analysis of the Company's operating lease liabilities showing the aggregate lease payments as of June 30, 2020.
(in thousands)June 30,
2020
2020 (remaining six months)562  
20211,377  
20221,662  
20231,712  
20241,763  
2025 and thereafter4,959  
Total lease payments(1)
12,035  
Less: imputed interest(2,432)