The liquidating trustee for bankrupt drug developer Tricida has filed a complaint in U.S. Bankruptcy Court for the District of Delaware accusing seven former executives and directors, along with an investment firm, of systematically stripping more than $740 million in corporate assets through insider trading, self-approved bonuses and a deliberate failure to protect valuable tax attributes before its 2023 collapse.

Filed Nov. 10 by trustee Jackson Square Advisors LLC, the complaint alleges that Tricida Inc.'s leadership breached fiduciary duties of care, loyalty and good faith in late 2022 by reopening a trading window that allowed investment firm and largest shareholder OrbiMed Advisors LLC to dump its shares, triggering an ownership change under the Internal Revenue Code that wiped out $740 million in net operating losses. The move limited the company's ability to write down certain future tax liabilities.

According to Jackson Square, those tax assets were central to any viable restructuring or sale but were sacrificed while the board simultaneously approved $2.4 million in bonuses for top officers. The trustee frames the conduct as a deliberate, value-destroying scheme.

"This case is about how Tricida's former officers and directors breached their fiduciary duties to Tricida by wrongfully allowing insiders to sell Tricida's stock and paying themselves millions of dollars in bonuses so that they could make as much money as possible," the trustee said in the complaint.

Tricida filed for Chapter 11 protection in January 2023 with roughly $350 million in debt after its kidney disease drug Veverimer failed a critical clinical trial in late 2022. As part of the case, U.S. Bankruptcy Judge John Dorsey rejected the company's initial plan in May 2023 because its opt-out structure attempted to bind shareholders to third-party releases despite their receiving no recovery.

Tricida later sold Veverimer to Texas-based Renibus Therapeutics in two public auctions, with contingent consideration of up to $152.75 million.

The filing centers on two coordinated actions taken in November 2022: authorizing the officer bonuses and reopening the insider trading window, both allegedly engineered by OrbiMed's board representatives, defendants David Bonita and Klaus Veitinger.

The trustee argues that on Nov. 15, 2022, Tricida's officers formally confirmed that its trading window must remain closed while the company explored a sale or restructuring. But allegedly "just six days later, after being pestered to open the trading window for weeks by Tricida's largest shareholder OrbiMed," the officers reversed course and allowed directors to trade. OrbiMed immediately sold its entire position, allegedly with full knowledge that the sale would eliminate Tricida's accumulated net operating losses.

The trustee asserts that this decision "decimated" the company's primary asset and directly precipitated Tricida's bankruptcy filing six weeks later, all without any board-level attempt to monetize or preserve the net operating losses in a strategic transaction.

The trustee's complaint also focused on executive compensation, saying that on the same day the window was supposed to remain closed, the board approved $2.4 million in officer bonuses, exceeding 100% of annual base salary. The trustee calls the payments value-destroying and entirely nonstrategic.

"There was zero business purpose for these bonuses and Tricida got no value for them," the trustee said, emphasizing that Tricida ultimately liquidated its remaining assets in bankruptcy for only $480,000, less than a quarter of the bonus payout.

Counts in the complaint assert breaches of fiduciary duty, corporate waste and aiding and abetting liability against OrbiMed for allegedly pressuring officers to open the trading window and using its board representatives to secure the bonus approvals.

Representatives for the parties did not immediately respond to requests for comment Friday.

Jackson Square Advisors LLC is represented by William A. Hazeltine and William D. Sullivan of Sullivan Hazeltine Allinson LLC.

Tricida Inc. is represented by Sean Matthew Beach, Allison S. Mielke and Carol E. Thompson of Young Conaway Stargatt & Taylor LLP; Edward G. Babbitt, Anthony J. Hornbach and Louis F. Solimine of Thompson Hine LLP; and John J. Kuster, Chelsea McManus, Jeri Leigh Miller, Samuel A. Newman, Charles M. Persons, Julia Philips Roth and Michael Sabino of Sidley Austin LLP.

The creditors are represented by Gregory Laufer and John A. Marcin of Paul Weiss Rifkind Wharton & Garrison LLP.

The case is In re: Tricida Inc., case number 1:23-bk-10024, in the U.S. Bankruptcy Court for the District of Delaware.