[Front Matter](index=1&type=section&id=Front%20Matter) [CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA](index=2&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS%20AND%20INDUSTRY%20DATA) This quarterly report contains numerous forward-looking statements involving significant risks and uncertainties, which the company is not obligated to update unless legally required - This report contains numerous forward-looking statements involving significant risks and uncertainties regarding company strategy, future operations, financial condition, revenue, costs, product development plans, and regulatory approvals[6](index=6&type=chunk)[7](index=7&type=chunk)[11](index=11&type=chunk) - The company is not obligated to update forward-looking statements unless required by applicable law[8](index=8&type=chunk) - Industry and market data in the report are from third-party publications and company estimates, involving multiple assumptions and limitations, requiring investor caution[9](index=9&type=chunk) [RISK FACTOR SUMMARY](index=3&type=section&id=RISK%20FACTOR%20SUMMARY) This summary outlines key investment risks, including ongoing losses, capital needs, single product reliance, clinical uncertainties, regulatory hurdles, and market competition - The company has incurred significant losses since inception and expects to continue incurring substantial and increasing losses, potentially never achieving or maintaining profitability[13](index=13&type=chunk) - The company requires substantial additional capital, and failure to obtain timely financing on acceptable terms may force delays, reductions, or abandonment of product development or commercialization efforts[13](index=13&type=chunk) - The company relies on the successful development and commercialization of its sole product candidate, Haduvio, and any delay or failure would materially harm the business[13](index=13&type=chunk) - Clinical drug development is lengthy, expensive, and uncertain, and Haduvio may fail to demonstrate expected safety or efficacy in clinical development or experience adverse events and side effects[13](index=13&type=chunk) - Haduvio's active ingredient, nalfurafine, carries an opioid-related respiratory depression warning on its drug label and may face abuse risk assessment and controlled substance classification[13](index=13&type=chunk)[14](index=14&type=chunk) - The company faces intense market competition, relies on third parties for clinical trials and product manufacturing, and inadequate intellectual property protection could also harm its business[14](index=14&type=chunk) [PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the company's unaudited condensed consolidated financial statements, including balance sheets, comprehensive loss, stockholders' equity, cash flows, and related notes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Indicator | September 30, 2023 (K USD) | December 31, 2022 (K USD) | | :----------------------- | :----------------------- | :----------------------- | | Cash and cash equivalents | 25,965 | 12,589 | | Marketable securities | 62,903 | 107,921 | | Prepaid expenses | 4,039 | 795 | | Other current assets | 1,046 | 1,311 | | **Total current assets** | **93,953** | **122,616** | | Operating lease right-of-use assets | 1,190 | 24 | | Other non-current assets | 297 | 205 | | Property, plant, equipment and leasehold improvements, net | 238 | 170 | | Finance lease right-of-use assets | 218 | — | | **Total assets** | **95,896** | **123,015** | | Accounts payable | 1,256 | 2,857 | | Accrued expenses | 3,625 | 3,518 | | Operating lease liabilities | 171 | 25 | | Finance lease liabilities | 121 | — | | Term loan | — | 7,000 | | **Total current liabilities** | **5,173** | **13,400** | | Operating lease liabilities (non-current) | 1,051 | 2 | | Finance lease liabilities (non-current) | 62 | — | | Term loan (non-current) | — | 2,151 | | Other non-current liabilities | — | 3 | | **Total liabilities** | **6,286** | **15,556** | | Common stock | 64 | 60 | | Additional paid-in capital | 321,076 | 317,590 | | Accumulated other comprehensive loss | (217) | (122) | | Accumulated deficit | (231,313) | (210,069) | | **Total stockholders' equity** | **89,610** | **107,459** | | **Total liabilities and stockholders' equity** | **95,896** | **123,015** | [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) | Indicator | For the three months ended September 30, 2023 (K USD) | For the three months ended September 30, 2022 (K USD) | For the nine months ended September 30, 2023 (K USD) | For the nine months ended September 30, 2022 (K USD) | | :--------------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Research and development expenses | 6,323 | 5,769 | 17,165 | 15,517 | | General and administrative expenses | 2,722 | 2,636 | 7,825 | 7,733 | | **Total operating expenses** | **9,045** | **8,405** | **24,990** | **23,250** | | Operating loss | (9,045) | (8,405) | (24,990) | (23,250) | | Net interest income | 1,183 | 424 | 3,611 | 623 | | Other income, net | 154 | — | 472 | — | | Interest expense | (3) | (292) | (387) | (889) | | Fair value adjustment of term loan derivative liability | — | — | — | (147) | | **Other income (expense), net** | **1,334** | **132** | **3,696** | **(413)** | | Loss before income taxes | (7,711) | (8,273) | (21,294) | (23,663) | | Income tax benefit | 13 | 7 | 50 | 16 | | **Net loss** | **(7,698)** | **(8,266)** | **(21,244)** | **(23,647)** | | Basic and diluted net loss per share | (0.08) | (0.12) | (0.21) | (0.44) | | Comprehensive loss | (7,667) | (8,394) | (21,339) | (23,910) | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) | Indicator | For the three months ended September 30, 2023 (K USD, except share count) | For the three months ended September 30, 2022 (K USD, except share count) | For the nine months ended September 30, 2023 (K USD, except share count) | For the nine months ended September 30, 2022 (K USD, except share count) | | :--------------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Common stock | 64 | 58 | 64 | 58 | | Additional paid-in capital | 321,076 | 314,672 | 321,076 | 314,672 | | Accumulated other comprehensive loss | (217) | (263) | (217) | (263) | | Accumulated deficit | (231,313) | (204,564) | (231,313) | (204,564) | | **Total stockholders' equity** | **89,610** | **109,903** | **89,610** | **109,903** | | Common stock issued upon exercise of stock options | 3 | 139 | 73 | 139 | | Net common stock issued under at-the-market sales agreement | 1,671 | — | 1,671 | (42) | | Common stock issued under employee stock purchase plan | — | — | 33 | 23 | | Common stock issued upon exercise of prepaid warrants | — | — | — | — | | Net common stock and warrants issued in public offering | — | 51,184 | — | 103,010 | | Common stock issued upon exercise of warrants | — | 5,890 | — | 11,782 | | Stock-based compensation | 530 | 569 | 1,713 | 1,826 | | Unrealized gain (loss) on available-for-sale securities | 31 | (128) | (95) | (263) | | Net loss | (7,698) | (8,266) | (21,244) | (23,647) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Category | For the nine months ended September 30, 2023 (K USD) | For the nine months ended September 30, 2022 (K USD) | | :----------------------- | :-------------------- | :-------------------- | | Net cash used in operating activities | (25,351) | (21,844) | | Net cash provided by (used in) investing activities | 46,583 | (59,067) | | Net cash used in (provided by) financing activities | (7,856) | 110,655 | | Net increase in cash and cash equivalents | 13,376 | 29,744 | | Cash and cash equivalents at beginning of period | 12,589 | 36,830 | | Cash and cash equivalents at end of period | 25,965 | 66,574 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [1. Nature of the Business](index=11&type=section&id=1.%20Nature%20of%20the%20Business) Trevi Therapeutics, Inc. is a clinical-stage biopharmaceutical company focused on developing and commercializing Haduvio for chronic cough associated with IPF, refractory chronic cough, and prurigo nodularis - The company focuses on developing and commercializing Haduvio (oral nalfurafine extended-release) for chronic cough associated with idiopathic pulmonary fibrosis (IPF), refractory chronic cough, and prurigo nodularis[29](index=29&type=chunk) - Haduvio is an oral extended-release formulation of nalfurafine, a mixed κ-opioid receptor agonist and μ-opioid receptor antagonist, approved as an injectable for pain treatment for over 20 years[30](index=30&type=chunk) - Nalfurafine's mechanism of action may mitigate abuse risk associated with μ-opioid agonists, and parenteral nalfurafine is not a controlled substance in the U.S. and most of Europe[30](index=30&type=chunk) [2. Summary of Significant Accounting Policies](index=11&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines significant accounting policies for the unaudited condensed consolidated financial statements, including estimates, marketable securities, R&D expenses, stock compensation, and lease accounting - Financial statements are prepared in accordance with U.S. GAAP and SEC rules, consolidating accounts of Trevi Therapeutics, Inc. and its wholly-owned subsidiary, Trevi Therapeutics Limited[31](index=31&type=chunk)[32](index=32&type=chunk) - Significant accounting estimates include research and development expense recognition, stock-based compensation valuation, and valuation allowance for deferred tax assets[34](index=34&type=chunk) - Available-for-sale marketable securities are reported at fair value, with unrealized gains and losses included in stockholders' equity; fair value measurements use a three-level hierarchy, with major financial instruments (e.g., corporate bonds, U.S. government agency securities) classified as Level 2[37](index=37&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) - Research and development expenses are recognized as incurred, including personnel costs, consulting fees, contract manufacturing, and CRO fees[46](index=46&type=chunk) - Stock-based compensation is recognized using the Black-Scholes valuation model under ASC 718, expensed on a straight-line basis over the service period[51](index=51&type=chunk)[56](index=56&type=chunk) - Leases are classified as operating or finance leases under ASC 842, with right-of-use assets and lease liabilities recognized on the balance sheet[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk) [3. Marketable Securities](index=15&type=section&id=3.%20Marketable%20Securities) This section details the fair value and amortized cost of available-for-sale marketable securities by type and contractual maturity as of September 30, 2023, and December 31, 2022 | Security Type | Amortized Cost as of September 30, 2023 (K USD) | Fair Value as of September 30, 2023 (K USD) | Amortized Cost as of December 31, 2022 (K USD) | Fair Value as of December 31, 2022 (K USD) | | :----------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Corporate bonds | 54,152 | 53,952 | 62,573 | 62,513 | | U.S. government agency securities | 4,993 | 4,978 | 2,905 | 2,903 | | Commercial paper | 1,994 | 1,994 | 30,739 | 30,739 | | Asset-backed securities | 1,981 | 1,979 | 1,912 | 1,914 | | U.S. Treasury bills | — | — | 9,914 | 9,852 | | **Total** | **63,120** | **62,903** | **108,043** | **107,921** | | Maturity Date | Amortized Cost as of September 30, 2023 (K USD) | Fair Value as of September 30, 2023 (K USD) | Amortized Cost as of December 31, 2022 (K USD) | Fair Value as of December 31, 2022 (K USD) | | :----------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Less than one year | 57,666 | 57,469 | 69,527 | 69,367 | | One to two years | 5,454 | 5,434 | 38,516 | 38,554 | | **Total** | **63,120** | **62,903** | **108,043** | **107,921** | - There were no realized gains or losses on available-for-sale marketable securities for the three and nine months ended September 30, 2023, and December 31, 2022[69](index=69&type=chunk) [4. Fair Value Measurements](index=17&type=section&id=4.%20Fair%20Value%20Measurements) This section presents financial assets and liabilities measured at fair value, categorized by hierarchy (Level 1, 2, 3), as of September 30, 2023, and December 31, 2022 | Asset Type | Level 1 as of September 30, 2023 (K USD) | Level 2 as of September 30, 2023 (K USD) | Level 3 as of September 30, 2023 (K USD) | Total as of September 30, 2023 (K USD) | | :----------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Money market funds | 25,715 | — | — | 25,715 | | Corporate bonds | — | 53,952 | — | 53,952 | | U.S. government agency securities | — | 4,978 | — | 4,978 | | Commercial paper | — | 1,994 | — | 1,994 | | Asset-backed securities | — | 1,979 | — | 1,979 | | **Total assets** | **25,715** | **62,903** | **—** | **88,618** | | Asset Type | Level 1 as of December 31, 2022 (K USD) | Level 2 as of December 31, 2022 (K USD) | Level 3 as of December 31, 2022 (K USD) | Total as of December 31, 2022 (K USD) | | :----------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Money market funds | 11,589 | — | — | 11,589 | | Corporate bonds | — | 62,513 | — | 62,513 | | Commercial paper | — | 30,739 | — | 30,739 | | U.S. Treasury bills | 9,852 | — | — | 9,852 | | U.S. government agency securities | — | 2,903 | — | 2,903 | | Asset-backed securities | — | 1,914 | — | 1,914 | | **Total assets** | **21,441** | **98,069** | **—** | **119,510** | [5. Leases](index=17&type=section&id=5.%20Leases) The company revised its Newport office lease in November 2022, expanding space and extending the term, and entered a 24-month furniture finance lease in December 2022, leading to increased lease assets and liabilities - The company revised its office lease agreement on November 21, 2022, increasing leased space from 5,600 to 12,500 square feet and extending the term to February 28, 2028[71](index=71&type=chunk) - In December 2022, the company entered into a 24-month finance lease agreement for furniture, with monthly payments of approximately **$11 thousand**[72](index=72&type=chunk) | Category | September 30, 2023 (K USD) | December 31, 2022 (K USD) | | :----------------------- | :------------ | :------------ | | Operating lease right-of-use assets | 1,190 | 24 | | Finance lease right-of-use assets | 218 | — | | **Total lease assets** | **1,408** | **24** | | Operating lease liabilities (current) | 171 | 25 | | Finance lease liabilities (current) | 121 | — | | Operating lease liabilities (non-current) | 1,051 | 2 | | Finance lease liabilities (non-current) | 62 | — | | **Total lease liabilities** | **1,405** | **27** | | Category | For the three months ended September 30, 2023 (K USD) | For the three months ended September 30, 2022 (K USD) | For the nine months ended September 30, 2023 (K USD) | For the nine months ended September 30, 2022 (K USD) | | :----------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Operating lease expense | 85 | 31 | 202 | 92 | | Finance lease expense | 12 | — | 24 | — | | **Total lease expense** | **97** | **31** | **226** | **92** | [6. Accrued Expenses](index=19&type=section&id=6.%20Accrued%20Expenses) Accrued expenses totaled **$3,625 thousand** as of September 30, 2023, a slight increase from **$3,518 thousand** at December 31, 2022, with accrued R&D project costs significantly rising | Category | September 30, 2023 (K USD) | December 31, 2022 (K USD) | | :----------------------- | :------------ | :------------ | | Accrued R&D projects | 1,842 | 1,130 | | Accrued compensation and benefits | 1,221 | 1,508 | | Accrued consulting and professional fees | 490 | 382 | | Other accrued | 72 | 498 | | **Total accrued expenses** | **3,625** | **3,518** | [7. Debt](index=19&type=section&id=7.%20Debt) The company fully repaid its term loan agreement with Silicon Valley Bank (SVB) on May 9, 2023, terminating the loan and leaving no outstanding borrowings as of September 30, 2023 - The company fully repaid the remaining balance under its term loan agreement with Silicon Valley Bank (SVB) on May 9, 2023, resulting in the complete termination of the SVB term loan[76](index=76&type=chunk) - The total repayment amounted to **$6.5 million**, including **$5.2 million** in remaining principal, **$1.2 million** in final payment fees, and **$0.1 million** in accrued interest and prepayment premium[76](index=76&type=chunk) - As of September 30, 2023, the company had no outstanding borrowings, compared to **$8.2 million** in SVB term loan outstanding as of December 31, 2022[88](index=88&type=chunk) | Category | For the three months ended September 30, 2023 (K USD) | For the three months ended September 30, 2022 (K USD) | For the nine months ended September 30, 2023 (K USD) | For the nine months ended September 30, 2022 (K USD) | | :----------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Interest paid | — | 170 | 202 | 470 | | Accrual of final payment fee | — | 89 | 150 | 309 | | Amortization of term loan discount | — | 33 | 30 | 110 | | **Total interest expense** | **—** | **292** | **382** | **889** | - The weighted-average interest rate for the SVB term loan was **10.25%** for the nine months ended September 30, 2023, compared to **5.27%** for the same period in 2022[89](index=89&type=chunk) [8. Stockholders' Equity](index=22&type=section&id=8.%20Stockholders'%20Equity) This section details changes in stockholders' equity, including common stock, warrants, and stock incentive plans, noting **4,333,394 shares** issued for **$12.7 million** via an ATM sales agreement | Category | September 30, 2023 (Shares) | December 31, 2022 (Shares) | | :--------------------------------------- | :------------ | :------------ | | Common stock reserved for issuance upon exercise of warrants and prepaid warrants | 45,330,707 | 48,330,707 | | Common stock reserved for issuance under 2019 Stock Incentive Plan | 6,549,024 | 4,553,202 | | Common stock reserved for issuance under 2019 Employee Stock Purchase Plan | 1,208,274 | 701,232 | | Common stock reserved for issuance under 2012 Stock Incentive Plan | 568,243 | 602,231 | | Common stock reserved for issuance under LPC purchase agreement | — | 30,000,000 | | **Total** | **53,656,248** | **84,187,372** | - As of September 30, 2023, the company issued and sold a total of **4,333,394 shares** of common stock under its ATM sales agreement, generating aggregate gross proceeds of **$12.7 million**[94](index=94&type=chunk) - In June 2023, the company filed a universal S-3 shelf registration statement allowing it to offer and sell up to **$200 million** of common stock, preferred stock, debt securities, units, and/or warrants from time to time[95](index=95&type=chunk) | Category | Prepaid Warrant Shares | Common Stock Warrant Shares | Total Warrant Shares | Weighted-Average Exercise Price | | :----------------------- | :--------------- | :--------------- | :--------------- | :--------------- | | Outstanding as of December 31, 2022 | 38,627,003 | 9,703,704 | 48,330,707 | $0.28 | | Exercised | (3,000,000) | — | (3,000,000) | $0.001 | | Outstanding as of September 30, 2023 | 35,627,003 | 9,703,704 | 45,330,707 | $0.29 | | Category | For the three months ended September 30, 2023 (K USD) | For the three months ended September 30, 2022 (K USD) | For the nine months ended September 30, 2023 (K USD) | For the nine months ended September 30, 2022 (K USD) | | :----------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | General and administrative expenses | 319 | 371 | 1,056 | 1,195 | | Research and development expenses | 211 | 198 | 657 | 631 | | **Total** | **530** | **569** | **1,713** | **1,826** | [9. Income Taxes](index=25&type=section&id=9.%20Income%20Taxes) The company maintains a full valuation allowance against its deferred tax assets and recognized income tax benefits primarily from estimated state R&D tax credits - As of September 30, 2023, and December 31, 2022, the company maintains a full valuation allowance against its deferred tax assets[112](index=112&type=chunk) - Income tax benefits for the three and nine months ended September 30, 2023, and 2022, represent the company's estimate of its state research and development tax credits[112](index=112&type=chunk) [10. Net Loss per Share](index=25&type=section&id=10.%20Net%20Loss%20per%20Share) This section summarizes the calculation of basic and diluted net loss per share, which were **$0.08** and **$0.21** for the three and nine months ended September 30, 2023, respectively | Indicator | For the three months ended September 30, 2023 (K USD, except share count) | For the three months ended September 30, 2022 (K USD, except share count) | For the nine months ended September 30, 2023 (K USD, except share count) | For the nine months ended September 30, 2022 (K USD, except share count) | | :--------------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Net loss | (7,698) | (8,266) | (21,244) | (23,647) | | Weighted-average common shares used in computing net loss per share (basic and diluted) | 99,325,540 | 68,898,810 | 98,880,882 | 53,221,949 | | Basic and diluted net loss per share | (0.08) | (0.12) | (0.21) | (0.44) | - The weighted-average impact of prepaid warrants is included in the calculation of basic and diluted net loss per share[113](index=113&type=chunk) - Due to net losses, potentially dilutive securities such as stock options and non-prepaid warrants are excluded from diluted net loss per share calculations as they are anti-dilutive[114](index=114&type=chunk) | Category | September 30, 2023 (Shares) | September 30, 2022 (Shares) | | :----------------------- | :------------ | :------------ | | Warrants | 9,703,704 | 9,703,704 | | Stock options | 5,315,543 | 4,141,907 | | **Total** | **15,019,247** | **13,845,611** | [11. Collaborative and Licensing Agreements](index=25&type=section&id=11.%20Collaborative%20and%20Licensing%20Agreements) The company has an exclusive global license agreement with Endo Pharmaceuticals Inc. for Haduvio, involving upfront fees, potential milestone payments, and low-to-mid double-digit percentage royalties on net sales - The company has an exclusive global license agreement with Endo Pharmaceuticals Inc. to develop and commercialize products containing nalfurafine hydrochloride, including Haduvio[116](index=116&type=chunk) - The company has paid upfront license fees and may be required to pay milestone payments (**$0.3 million** upon completion of the first Phase III clinical trial, **$0.8 million** upon U.S. marketing approval) and low-to-mid double-digit percentage royalties on net sales[117](index=117&type=chunk)[118](index=118&type=chunk) - The license agreement provides for termination rights for both parties, including for material breach or company bankruptcy, and the company may terminate with 180 days' notice[121](index=121&type=chunk) [12. Commitments and Contingencies](index=26&type=section&id=12.%20Commitments%20and%20Contingencies) The company outsources most development activities to third parties, which may involve termination fees, and also has commitments under lease and license agreements - Most of the company's development activities are outsourced to third parties, such as CROs and contract manufacturers, and these arrangements may require the company to pay termination fees[123](index=123&type=chunk) - The company also has commitments under lease and license agreements[124](index=124&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses the company's financial condition and operating results for the three and nine months ended September 30, 2023, highlighting ongoing net losses, negative cash flows, and future funding needs for Haduvio's development [Overview](index=27&type=section&id=Overview) The company, a clinical-stage biopharmaceutical firm, focuses on Haduvio's development for chronic cough and prurigo nodularis, with ongoing clinical trials and an accumulated deficit of **$231.3 million** - The company focuses on Haduvio's development for chronic cough associated with IPF, refractory chronic cough, and prurigo nodularis[128](index=128&type=chunk) - Haduvio showed statistically significant efficacy in the Phase II CANAL trial for IPF chronic cough, with a Phase IIb dose-ranging trial planned for Q4 2023 and a Phase Ib respiratory physiology trial for Q1 2024[129](index=129&type=chunk)[130](index=130&type=chunk) - The Phase IIa RIVER clinical trial for refractory chronic cough commenced in November 2023, with top-line data expected in H2 2024[131](index=131&type=chunk) - Haduvio showed positive results in the Phase IIb/III PRISM trial for prurigo nodularis, with plans for FDA meetings to determine next steps for Phase III clinical trials and explore strategic collaborations[132](index=132&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk) - The company has incurred continuous losses since its inception in 2011, with an accumulated deficit of **$231.3 million** as of September 30, 2023[136](index=136&type=chunk) - The company has raised funds through an IPO, ATM sales agreements, and multiple private placements, and fully repaid the SVB term loan on May 9, 2023[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk) - As of September 30, 2023, the company held **$88.9 million** in cash, cash equivalents, and marketable securities, projected to fund operations into 2026[144](index=144&type=chunk)[188](index=188&type=chunk) [Components of Operating Results](index=29&type=section&id=Components%20of%20Operating%20Results) This section analyzes operating results components, including R&D, G&A, net interest income, other income, interest expense, and term loan derivative fair value adjustments [Research and Development Expenses](index=29&type=section&id=Research%20and%20Development%20Expenses) All R&D expenses are dedicated to Haduvio's development, encompassing personnel, stock-based compensation, consulting, contract manufacturing, and CRO fees, with significant increases anticipated for future clinical development and commercialization - All research and development expenses are related to Haduvio's development, including personnel costs, stock-based compensation, consulting fees, contract manufacturing, and CRO fees[147](index=147&type=chunk)[148](index=148&type=chunk) - Research and development expenses are expected to increase significantly in the coming years to advance Haduvio's clinical development, regulatory approval, and commercialization preparations[149](index=149&type=chunk) [General and Administrative Expenses](index=30&type=section&id=General%20and%20Administrative%20Expenses) General and administrative expenses primarily cover personnel costs (including stock-based compensation), professional fees for legal, consulting, and accounting, and other operational expenses not classified as R&D - General and administrative expenses primarily include personnel-related costs (including stock-based compensation), professional fees for legal, consulting, and accounting services, and rent and other operating expenses[150](index=150&type=chunk) - General and administrative expenses are expected to increase due to higher personnel costs and infrastructure expansion[151](index=151&type=chunk) [Other Income (Expense), Net](index=30&type=section&id=Other%20Income%20(Expense),%20Net) Other income (expense), net, comprises net interest income, other income, net, and interest expense, with interest income primarily from cash and marketable securities, and interest expense related to the SVB term loan which was fully repaid - Net interest income primarily derives from interest earned on cash, cash equivalents, and marketable securities[152](index=152&type=chunk) - Other income, net, includes employee retention tax credits under the CARES Act, foreign currency transaction gains/losses, and non-material impacts from early debt extinguishment[153](index=153&type=chunk) - Interest expense is primarily associated with the SVB term loan, which was fully repaid on May 9, 2023[154](index=154&type=chunk)[156](index=156&type=chunk) - Fair value adjustment of term loan derivative liability was recognized as a derivative liability before the SVB loan agreement amendment and subsequently adjusted to fair value in reporting periods[158](index=158&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) This section compares the company's operating results for the three and nine months ended September 30, 2023, and 2022, showing a narrowed net loss in both periods due to increased interest income and reduced interest expense, despite higher operating costs [Comparison of the Three Months Ended September 30, 2023 and 2022](index=31&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20September%2030,%202023%20and%202022) For the three months ended September 30, 2023, the company's net loss narrowed to **$7.7 million** from **$8.3 million** in the prior year, driven by increased interest income and reduced interest expense, partially offset by higher R&D costs | Indicator | For the three months ended September 30, 2023 (K USD) | For the three months ended September 30, 2022 (K USD) | Change (K USD) | | :----------------------- | :-------------------- | :-------------------- | :--- | | Research and development expenses | 6,323 | 5,769 | 554 | | General and administrative expenses | 2,722 | 2,636 | 86 | | **Total operating expenses** | **9,045** | **8,405** | **640** | | Operating loss | (9,045) | (8,405) | (640) | | Net interest income | 1,183 | 424 | 759 | | Other income, net | 154 | — | 154 | | Interest expense | (3) | (292) | 289 | | **Other income, net** | **1,334** | **132** | **1,202** | | Loss before income taxes | (7,711) | (8,273) | 562 | | Income tax benefit | 13 | 7 | 6 | | **Net loss** | **(7,698)** | **(8,266)** | **568** | - Research and development expenses increased by **$0.55 million** to **$6.3 million**, primarily due to start-up costs for chronic cough programs and increased consulting services, partially offset by decreased clinical development costs for completed PRISM and CANAL trials[160](index=160&type=chunk) - Net interest income increased by **$0.76 million**, primarily due to higher cash and marketable securities balances and rising interest rates, while interest expense decreased due to the early repayment of the SVB term loan[162](index=162&type=chunk) [Comparison of the Nine Months Ended September 30, 2023 and 2022](index=32&type=section&id=Comparison%20of%20the%20Nine%20Months%20Ended%20September%2030,%202023%20and%202022) For the nine months ended September 30, 2023, the company's net loss decreased to **$21.2 million** from **$23.6 million** in the prior year, driven by a significant increase in interest income and reduced interest expense | Indicator | For the nine months ended September 30, 2023 (K USD) | For the nine months ended September 30, 2022 (K USD) | Change (K USD) | | :--------------------------------------- | :-------------------- | :-------------------- | :--- | | Research and development expenses | 17,165 | 15,517 | 1,648 | | General and administrative expenses | 7,825 | 7,733 | 92 | | **Total operating expenses** | **24,990** | **23,250** | **1,740** | | Operating loss | (24,990) | (23,250) | (1,740) | | Net interest income | 3,611 | 623 | 2,988 | | Other income, net | 472 | — | 472 | | Interest expense | (387) | (889) | 502 | | Fair value adjustment of term loan derivative liability | — | (147) | 147 | | **Other income (expense), net** | **3,696** | **(413)** | **4,109** | | Loss before income taxes | (21,294) | (23,663) | 2,369 | | Income tax benefit | 50 | 16 | 34 | | **Net loss** | **(21,244)** | **(23,647)** | **2,403** | - Research and development expenses increased by **$1.6 million** to **$17.2 million**, primarily due to start-up costs for chronic cough programs, increased consulting services, and higher personnel-related expenses[164](index=164&type=chunk) - Other income (expense), net, shifted from a **$0.4 million** expense in 2022 to a **$3.7 million** income in 2023, primarily due to a **$3.0 million** increase in net interest income, CARES Act tax credits, and reduced interest expense from the early repayment of the SVB term loan[166](index=166&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) The company consistently incurs operating losses and negative cash flows, funded by equity and debt, and anticipates significant future Haduvio development costs, requiring additional capital beyond its current **$88.9 million** in liquid assets [General](index=32&type=section&id=General) The company has consistently generated operating losses and negative cash flows since inception, primarily financed through equity and term loans, and expects significant future expenditures for Haduvio's clinical development and commercialization - The company has consistently generated operating losses and negative cash flows since inception, primarily raising funds through preferred stock, convertible notes, IPO proceeds, common stock and warrant sales, and term loans[167](index=167&type=chunk) - As of September 30, 2023, the company held **$88.9 million** in cash, cash equivalents, and marketable securities[144](index=144&type=chunk) - The company expects its existing cash, cash equivalents, and marketable securities to fund operating expenses and capital expenditure requirements into 2026[144](index=144&type=chunk)[188](index=188&type=chunk) - The company anticipates significant future expenditures to advance Haduvio's clinical development, regulatory approval, and commercialization activities, requiring substantial additional capital to support ongoing operations and growth strategies[145](index=145&type=chunk)[146](index=146&type=chunk) [SVB Loan Agreement](index=33&type=section&id=SVB%20Loan%20Agreement) The company fully repaid its **$6.5 million** term loan with Silicon Valley Bank (SVB) on May 9, 2023, terminating the agreement which was initially for **$14 million** and subject to floating interest rates and milestone conditions - The company fully repaid the remaining balance under its term loan agreement with Silicon Valley Bank (SVB) on May 9, 2023, resulting in the complete termination of the SVB term loan[172](index=172&type=chunk) - The total repayment amounted to **$6.5 million**, including **$5.2 million** in remaining principal, **$1.2 million** in final payment fees, and **$0.1 million** in accrued interest and prepayment premium[172](index=172&type=chunk) - The SVB loan agreement was initially entered into in August 2020 for **$14 million** in principal, with a floating interest rate and milestone conditions related to Haduvio clinical trial data and financing[173](index=173&type=chunk) - The loan agreement was amended multiple times to modify cash collateral conditions, and after the third amendment in April 2022, the company met equity financing conditions, releasing the cash collateral requirement[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) [Cash Flows](index=34&type=section&id=Cash%20Flows) For the nine months ended September 30, 2023, operating activities used **$25.4 million** in cash, investing activities provided **$46.6 million**, and financing activities used **$7.9 million**, resulting in a net increase of **$13.4 million** in cash and cash equivalents | Cash Flow Category | For the nine months ended September 30, 2023 (K USD) | For the nine months ended September 30, 2022 (K USD) | Change (K USD) | | :----------------------- | :-------------------- | :-------------------- | :--- | | Net cash used in operating activities | (25,351) | (21,844) | (3,507) | | Net cash provided by (used in) investing activities | 46,583 | (59,067) | 105,650 | | Net cash used in (provided by) financing activities | (7,856) | 110,655 | (118,511) | | Net increase in cash and cash equivalents | 13,376 | 29,744 | (16,368) | | Cash and cash equivalents at end of period | 25,965 | 66,574 | (40,609) | | Cash and cash equivalents at beginning of period | 12,589 | 36,830 | (24,241) | | **Cash and cash equivalents at end of period** | **25,965** | **66,574** | **(40,609)** | - For the nine months ended September 30, 2023, operating activities used **$25.4 million** in cash, primarily due to a **$21.2 million** net loss and **$4.6 million** in net changes in operating assets and liabilities[178](index=178&type=chunk) - For the nine months ended September 30, 2023, investing activities provided **$46.6 million** in cash, primarily from **$55.7 million** in maturities of available-for-sale marketable securities, partially offset by **$9.0 million** in purchases[180](index=180&type=chunk) - For the nine months ended September 30, 2023, financing activities used **$7.9 million** in cash, primarily for **$9.4 million** in SVB term loan repayments (including final payment fees and prepayment premium), partially offset by **$1.7 million** in equity issuance proceeds from the ATM sales agreement and **$0.1 million** from stock option exercises and employee stock purchase plan sales[182](index=182&type=chunk) [Funding Requirements](index=35&type=section&id=Funding%20Requirements) The company anticipates significant future expenditures for Haduvio's clinical development and commercialization, requiring substantial additional funding, and failure to secure timely financing may delay or abandon product development - The company anticipates significant future expenditures to advance Haduvio's clinical development, regulatory approval, and commercialization activities[184](index=184&type=chunk) - Recent major expenditures will be for subsequent trials for IPF chronic cough, the Phase 2a RIVER clinical trial for refractory chronic cough, and the second part of the HAP study[186](index=186&type=chunk) - The company requires substantial additional capital to support ongoing operations, potentially raised through equity offerings, debt financing, or collaborative and licensing arrangements[185](index=185&type=chunk)[190](index=190&type=chunk) - Failure to obtain timely and sufficient funding may lead to delays, reductions, or abandonment of product development and commercialization efforts[191](index=191&type=chunk) - Equity financing may dilute existing stockholders' equity, while debt financing may impose fixed payment obligations and restrictive covenants[190](index=190&type=chunk) [Critical Accounting Policies and Use of Estimates](index=36&type=section&id=Critical%20Accounting%20Policies%20and%20Use%20of%20Estimates) This section reiterates critical accounting policies and estimates for condensed consolidated financial statements, including R&D, stock compensation, income taxes, and fair value, with no significant changes for the nine months ended September 30, 2023 - Critical accounting policies include research and development expenses, stock-based compensation, income taxes, warrants, and fair value measurements[193](index=193&type=chunk) - There were no significant changes to critical accounting policies for the nine months ended September 30, 2023[193](index=193&type=chunk) [Recently Adopted Accounting Pronouncements](index=36&type=section&id=Recently%20Adopted%20Accounting%20Pronouncements) The company did not adopt any new accounting pronouncements for the nine months ended September 30, 2023 - The company did not adopt any new accounting pronouncements for the nine months ended September 30, 2023[194](index=194&type=chunk) [Recently Issued Accounting Pronouncements](index=36&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) The company did not issue any new accounting pronouncements expected to have a material impact on the condensed consolidated financial statements for the nine months ended September 30, 2023 - The company did not issue any new accounting pronouncements expected to have a material impact on the condensed consolidated financial statements for the nine months ended September 30, 2023[195](index=195&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable - This section is not applicable[197](index=197&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) As of September 30, 2023, management assessed and determined its disclosure controls and procedures were effective, with no material changes in internal control over financial reporting during the quarter - As of September 30, 2023, the company's management, including the Chief Executive Officer and Chief Financial Officer, assessed and determined its disclosure controls and procedures were effective[197](index=197&type=chunk) - There were no material changes in internal control over financial reporting during the three months ended September 30, 2023[198](index=198&type=chunk) [PART II. OTHER INFORMATION](index=37&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently facing any material legal proceedings - The company is not currently facing any material legal proceedings[199](index=199&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) This section details numerous risks that could cause actual results to differ materially from forward-looking statements, including financial position, Haduvio's development, third-party reliance, intellectual property, regulatory compliance, employee matters, and common stock risks [Risks Related to Our Financial Position and Need for Additional Capital](index=37&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Need%20for%20Additional%20Capital) The company has incurred continuous losses, with an accumulated deficit of **$231.3 million** as of September 30, 2023, and requires substantial additional capital for Haduvio's development and commercialization, as existing funds are insufficient - The company has incurred significant net losses since inception, with an accumulated deficit of **$231.3 million** as of September 30, 2023, and expects to continue incurring substantial and increasing losses in the future[201](index=201&type=chunk) - The company has not generated any revenue from product sales and has not completed the development of any product candidates, potentially never achieving or maintaining profitability[201](index=201&type=chunk)[203](index=203&type=chunk) - The company requires substantial additional capital to support Haduvio's clinical development, regulatory approval, and commercialization activities, as existing cash, cash equivalents, and marketable securities are insufficient to complete Haduvio's development across all indications[208](index=208&type=chunk)[209](index=209&type=chunk) - Failure to obtain timely and sufficient funding may lead to delays, reductions, or abandonment of product development and commercialization efforts, and may dilute existing stockholders' equity or impose restrictive debt terms[208](index=208&type=chunk)[209](index=209&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk) - The company expects its existing cash, cash equivalents, and marketable securities to fund operating expenses and capital expenditure requirements into 2026, but this estimate does not include additional clinical trial costs for prurigo nodularis[210](index=210&type=chunk) [Risks Related to the Development and Commercialization of Haduvio and Any Future Product Candidates](index=40&type=section&id=Risks%20Related%20to%20the%20Development%20and%20Commercialization%20of%20Haduvio%20and%20Any%20Future%20Product%20Candidates) The company heavily relies on Haduvio's successful development and commercialization, facing risks from unproven development methods, lengthy and uncertain clinical trials, potential side effects like respiratory depression, and market acceptance challenges even if approved - The company heavily relies on Haduvio's successful development and commercialization, but its development approach (oral nalfurafine extended-release) is not fully validated, and nalfurafine is not approved for indications other than pain[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[221](index=221&type=chunk) - Clinical drug development is lengthy, expensive, and uncertain, potentially delayed or failed by poor clinical trial results, patient recruitment difficulties, adverse events, or side effects[222](index=222&type=chunk)[224](index=224&type=chunk)[227](index=227&type=chunk)[238](index=238&type=chunk)[239](index=239&type=chunk)[243](index=243&type=chunk) - Haduvio as a mixed κ-opioid receptor agonist and μ-opioid receptor antagonist, may have psychiatric side effects (e.g., euphoria, somnolence), withdrawal effects, respiratory depression, potential cardiac risks, and opioid-related endocrine side effects[244](index=244&type=chunk)[248](index=248&type=chunk) - Nalfurafine's drug label carries an opioid-related respiratory depression warning, and Haduvio, if approved, may carry similar warnings and could be classified as a controlled substance by the DEA, limiting its use and commercialization[248](index=248&type=chunk)[249](index=249&type=chunk)[250](index=250&type=chunk)[251](index=251&type=chunk)[253](index=253&type=chunk) - Even if Haduvio receives marketing approval, it may not achieve commercial success due to low market acceptance by physicians, patients, and third-party payors, intense competition, unfavorable pricing regulations, or healthcare reform measures[261](index=261&type=chunk)[262](index=262&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[276](index=276&type=chunk)[277](index=277&type=chunk)[278](index=278&type=chunk)[279](index=279&type=chunk)[280](index=280&type=chunk)[281](index=281&type=chunk)[282](index=282&type=chunk) - The company's limited resource allocation may lead to missed opportunities for other potentially more commercially viable products or indications[263](index=263&type=chunk)[264](index=264&type=chunk) [Risks Related to Our Dependence on Third Parties](index=52&type=section&id=Risks%20Related%20to%20Our%20Dependence%20on%20Third%20Parties) The company heavily relies on third parties for clinical trials, manufacturing, storage, packaging, and distribution, including a single supplier for Haduvio's active ingredient, and faces uncertainties in establishing sales and marketing capabilities or partnerships - The company relies on third parties (e.g., CROs, clinical data management organizations, medical institutions, and clinical investigators) for clinical trials, and their poor performance or termination of collaboration could lead to clinical development delays[286](index=286&type=chunk)[287](index=287&type=chunk)[288](index=288&type=chunk) - The company relies on third parties for the manufacturing, storage, packaging, and distribution of Haduvio and other drug products, including Mallinckrodt, a single supplier for Haduvio's active ingredient, whose bankruptcy filing could affect supply[289](index=289&type=chunk)[290](index=290&type=chunk)[291](index=291&type=chunk)[292](index=292&type=chunk) - Third-party manufacturers must comply with cGMPs and similar regulatory requirements, and failure to pass FDA or other regulatory inspections could delay approval or hinder commercialization[293](index=293&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk) - The company plans to commercialize Haduvio for IPF chronic cough in the U.S. independently but will seek strategic collaborations for other indications (e.g., refractory chronic cough or prurigo nodularis) and markets outside the U.S.; failure to establish or maintain these collaborations could impact product commercialization[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk)[297](index=297&type=chunk)[298](index=298&type=chunk) - Collaborating with third parties carries risks, including insufficient resource commitment, failure to fulfill obligations, independent development of competing products, or termination due to strategic changes, all of which could lead to development delays or additional costs[300](index=300&type=chunk)[301](index=301&type=chunk) [Risks Related to Our Intellectual Property](index=55&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) The company relies on an exclusive license agreement for Haduvio, and its success depends on adequate patent protection, which is uncertain, costly, and vulnerable to challenges, infringement, and changes in patent law, while also facing challenges in protecting trade secrets globally - The company relies on an exclusive license agreement with Endo Pharmaceuticals Inc., and failure to comply with its obligations or a bankruptcy event could lead to loss of license rights or liability for damages[303](index=303&type=chunk)[304](index=304&type=chunk) - The company's success depends on adequate patent protection for Haduvio and future product candidates, but the patent application and approval process is expensive, time-consuming, and uncertain, potentially failing to secure or maintain sufficient patent protection[307](index=307&type=chunk) - Patents may face third-party challenges (e.g., post-grant review, invalidity lawsuits), leading to narrowed scope, invalidation, or unenforceability, thereby limiting the company's ability to prevent competitors[311](index=311&type=chunk) - Changes in patent law or its interpretation (e.g., America Invents Act, European Unified Patent System) could weaken patent value or scope of protection[313](index=313&type=chunk)[322](index=322&type=chunk)[323](index=323&type=chunk)[324](index=324&type=chunk)[325](index=325&type=chunk)[326](index=326&type=chunk) - Failure to protect the confidentiality of trade secrets could negatively impact the value of the company's products and business[316](index=316&type=chunk) - The company may become involved in intellectual property infringement litigation, which can be costly, time-consuming, and uncertain, potentially preventing or delaying the development or commercialization of Haduvio or any future product candidates[317](index=317&type=chunk)[318](index=318&type=chunk)[319](index=319&type=chunk)[320](index=320&type=chunk)[321](index=321&type=chunk) - Enforcing intellectual property globally may face challenges, especially in countries with weaker IP protection, and geopolitical actions could increase uncertainty in patent application and maintenance[327](index=327&type=chunk)[328](index=328&type=chunk)[329](index=329&type=chunk) [Risks Related to Regulatory Approval and Other Legal Compliance Matters](index=61&type=section&id=Risks%20Related%20to%20Regulatory%20Approval%20and%20Other%20Legal%20Compliance%20Matters) Haduvio's regulatory approval process is lengthy, costly, and uncertain, potentially leading to strict limitations or denial, while ongoing compliance with healthcare laws, privacy regulations, and international operations poses significant risks of penalties and reputational damage - If the FDA does not deem Haduvio eligible for the FDCA Section 505(b)(2) pathway or requires unexpected conditions, the approval pathway will be longer, more costly, and riskier[337](index=337&type=chunk)[338](index=338&type=chunk)[339](index=339&type=chunk)[340](index=340&type=chunk)[341](index=341&type=chunk) - Even after completing necessary clinical trials, the regulatory approval process remains expensive, time-consuming, and uncertain, potentially failing to secure commercialization approval or receiving approval with restrictions[342](index=342&type=chunk)[343](index=343&type=chunk)[344](index=344&type=chunk)[345](index=345&type=chunk)[346](index=346&type=chunk) - The FDA may not accept clinical trial data conducted overseas, leading to additional delays and expenses[347](index=347&type=chunk)[348](index=348&type=chunk) - Fast track, priority review, or breakthrough therapy designations, as well as EU PRIME designation, do not guarantee faster development or approval processes, nor FDA or EMA approval[351](index=351&type=chunk)[353](index=353&type=chunk) - Even if a product receives marketing approval, its manufacturing and marketing may be subject to ongoing regulation and restrictions, including risks of off-label promotion, which could lead to criminal penalties, substantial fines, or other sanctions[354](index=354&type=chunk)[355](index=355&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk)[358](index=358&type=chunk)[359](index=359&type=chunk)[360](index=360&type=chunk) - Insufficient government agency funding (e.g., government shutdowns) could hinder timely development or commercialization of new products, negatively impacting the company's business[365](index=365&type=chunk)[366](index=366&type=chunk)[367](index=367&type=chunk)[368](index=368&type=chunk) - Current and future healthcare legislation (e.g., ACA, IRA) may increase the difficulty and cost of obtaining marketing approval and commercialization, and impact product pricing and reimbursement[369](index=369&type=chunk)[370](index=370&type=chunk)[371](index=371&type=chunk)[372](index=372&type=chunk)[373](index=373&type=chunk)[374](index=374&type=chunk)[375](index=375&type=chunk)[376](index=376&type=chunk)[377](index=377&type=chunk)[378](index=378&type=chunk)[379](index=379&type=chunk)[380](index=380&type=chunk)[381](index=381&type=chunk)[382](index=382&type=chunk) - Relationships with customers, healthcare providers, and payors will be subject to anti-kickback, fraud and abuse, and other healthcare laws and regulations, with violations potentially leading to criminal sanctions, civil penalties, contractual damages, and reputational harm[383](index=383&type=chunk)[384](index=384&type=chunk)[385](index=385&type=chunk)[386](index=386&type=chunk)[387](index=387&type=chunk)[388](index=388&type=chunk)[389](index=389&type=chunk)[390](index=390&type=chunk)[391](index=391&type=chunk) - Compliance with global privacy and data security requirements (e.g., GDPR, CCPA, CPRA) may result in additional costs and liabilities or limit the company's ability to collect and process data globally[392](index=392&type=chunk)[393](index=393&type=chunk)[394](index=394&type=chunk)[395](index=395&type=chunk)[396](index=396&type=chunk) - Failure to comply with international operating laws (e.g., FCPA, anti-bribery laws) could lead to significant civil and criminal penalties[397](index=397&type=chunk)[398](index=398&type=chunk)[399](index=399&type=chunk)[400](index=400&type=chunk)[401](index=401&type=chunk)[402](index=402&type=chunk) - Failure to comply with environmental, health, and safety laws and regulations could result in fines or costs and harm the company's business[403](index=403&type=chunk)[404](index=404&type=chunk)[405](index=405&type=chunk) - System failures could lead to business interruptions, data loss, or breaches, damaging the company's reputation and delaying product development[406](index=406&type=chunk)[407](index=407&type=chunk) - If the FDA or other regulatory authorities approve generic versions of the company's small molecule product candidates or fail to grant appropriate exclusivity periods, it could adversely affect sales of the company's products[408](index=408&type=chunk)[409](index=409&type=chunk)[410](index=410&type=chunk)[411](index=411&type=chunk) [Risks Related to Employee Matters and Managing our Growth](index=74&type=section&id=Risks%20Related%20to%20Employee%20Matters%20and%20Managing%20our%20Growth) The company's success depends on retaining key personnel and managing growth effectively in a competitive industry, while employee misconduct or non-compliance could lead to significant liabilities and reputational damage - The company highly depends on key members of its executive and scientific teams, and their departure could hinder the achievement of R&D and commercialization goals[412](index=412&type=chunk) - The company in the biotechnology and pharmaceutical industries faces intense competition for attracting and retaining highly qualified scientific, clinical, manufacturing, and sales and marketing personnel[413](index=413&type=chunk)[414](index=414&type=chunk) - If the company expands its organization, it may encounter difficulties in managing growth, including effectively managing operational expansion, retaining key employees, and recruiting and training new personnel[415](index=415&type=chunk) - Misconduct by employees, independent contractors, and consultants, or failure to comply with regulatory standards and requirements, could lead to significant liabilities for the company and harm its reputation[416](index=416&type=chunk)[417](index=417&type=chunk) [Risks Related to Our Common Stock](index=75&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) The company's common stock trading price is highly volatile, potentially leading to significant investor losses, and future stock sales or failure to meet Nasdaq listing requirements could negatively impact share price and dilute existing stockholders - The trading price of the company's common stock is highly volatile, potentially leading to significant investor losses, and may be affected by macroeconomic factors such as inflation and rising interest rates[424](index=424&type=chunk)[425](index=425&type=chunk) - Failure to comply with Nasdaq's continued listing requirements (e.g., minimum bid price) could result in delisting risk, impacting share price and financing ability[419](index=419&type=chunk)[420](index=420&type=chunk)[421](index=421&type=chunk)[422](index=422&type=chunk)[423](index=423&type=chunk) - Future sales of a large number of common shares (including by the company itself, employees, and significant stockholders) and the existence of a large number of unexercised warrants could negatively impact the share price and dilute existing stockholders' equity[429](index=429&type=chunk)[430](index=430&type=chunk)[431](index=431&type=chunk)[432](index=432&type=chunk)[433](index=433&type=chunk)[434](index=434&type=chunk)[435](index=435&type=chunk)[436](index=436&type=chunk)[437](index=437&type=chunk)[438](index=438&type=chunk)[439](index=439&type=chunk)[440](index=440&type=chunk)[441](index=441&type=chunk)[442](index=442&type=chunk)[443](index=443&type=chunk)[444](index=444&type=chunk) - The company's equity is concentrated among executive officers, directors, and their affiliates (approximately **35.8%** as of November 9, 2023), potentially limiting new investors' influence on significant corporate decisions[445](index=445&type=chunk) - The company does not intend to pay cash dividends in the foreseeable future, and stockholder returns will primarily depend on the appreciation of common stock price[446](index=446&type=chunk)[447](index=447&type=chunk) - As an "emerging growth company" and "smaller reporting company," the company benefits from simplified disclosure requirements, which may reduce the attractiveness of its common stock to certain investors[448](index=448&type=chunk) - As a public company, the company will incur higher operating costs and compliance burdens for legal, accounting, and investor relations, and failure to maintain effective internal controls could impair the accuracy of financial statements[449](index=449&type=chunk)[450](index=450&type=chunk)[451](index=451&type=chunk) - The company may not be able to fully utilize its net operating loss carryforwards and R&D tax credits, and changes in tax law could adversely affect its business and financial condition[452](index=452&type=chunk)[453](index=453&type=chunk)[454](index=454&type=chunk)[455](index=455&type=chunk)[456](index=456&type=chunk) - Provisions in the company's organizational documents and Delaware law may prevent or deter stockholders from changing management or gaining control, and may limit the stock price[457](index=457&type=chunk)[458](index=458&type=chunk) - The exclusive forum provision in the company's bylaws may limit stockholders' ability to seek a favorable judicial forum, increasing the cost of resolving disputes[459](index=459&type=chunk)[460](index=460&type=chunk) [Item 6. Exhibits](index=83&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with this quarterly report, including CEO and CFO certifications and XBRL files | Exhibit Number | Description | | :------- | :--- | | 31.1* | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 31.2* | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 32.1* | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | 32.2* | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | 101.INS* | Inline XBRL Instance Document – The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document | | 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | | 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | | 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | | 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | [SIGNATURES](index=85&type=section&id=SIGNATURES) This quarterly report was duly signed by Jennifer L. Good, President and Chief Executive Officer, and Lisa Delfini, Chief Financial Officer of Trevi Therapeutics, Inc. on November 9, 2023 - This report was signed by Jennifer L. Good, President and Chief Executive Officer, and Lisa Delfini, Chief Financial Officer of Trevi Therapeutics, Inc. on November 9, 2023[465](index=465&type=chunk)[467](index=467&type=chunk)

Trevi Therapeutics, Inc. (NASDAQ:TRVI) Q2 2023 Earnings Conference Call August 10, 2023 4:30 PM ET Company Participants Jennifer Good - President and Chief Executive Officer Lisa Delfini - Chief Financial Officer Conference Call Participants Annabel Samimy - Stifel Serge Belanger - Needham and Company Leland Gershell - Oppenheimer William Wood - B. Riley Securities Operator Good afternoon and welcome to the Trevi Therapeutics’ Second Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note ...

[PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of comprehensive loss, stockholders' equity, and cash flows, along with their accompanying notes, highlighting key financial movements and an improved net loss [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) **Condensed Consolidated Balance Sheets (Amounts in thousands)** | Metric | June 30, 2023 (Unaudited) | December 31, 2022 | | :--------------------------------- | :------------------------ | :------------------ | | Total Assets | $100,977 | $123,015 | | Total Liabilities | $5,904 | $15,556 | | Total Stockholders' Equity | $95,073 | $107,459 | [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) **Condensed Consolidated Statements of Comprehensive Loss (Amounts in thousands)** | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $5,842 | $5,103 | $10,842 | $9,748 | | General and administrative | $2,540 | $2,717 | $5,103 | $5,097 | | Total operating expenses | $8,382 | $7,820 | $15,945 | $14,845 | | Loss from operations | $(8,382) | $(7,820) | $(15,945) | $(14,845) | | Interest income, net | $1,207 | $195 | $2,428 | $199 | | Interest expense | $(153) | $(295) | $(384) | $(597) | | Net loss | $(7,145) | $(8,052) | $(13,546) | $(15,381) | | Basic and diluted net loss per common share | $(0.07) | $(0.14) | $(0.14) | $(0.34) | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) **Condensed Consolidated Statements of Stockholders' Equity (Amounts in thousands)** | Metric | December 31, 2022 | June 30, 2023 | | :--------------------------------- | :------------------ | :------------------ | | Total Stockholders' Equity | $107,459 | $95,073 | | Stock-based compensation | — | $1,183 | | Net loss | — | $(13,546) | | Unrealized losses on available-for-sale marketable securities | $(122) | $(248) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) **Condensed Consolidated Statements of Cash Flows (Amounts in thousands)** | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Net cash used in operating activities | $(18,072) | $(13,268) | | Net cash provided by (used in) investing activities | $28,601 | $(54,217) | | Net cash (used in) provided by financing activities | $(9,366) | $55,353 | | Net increase (decrease) in cash and cash equivalents | $1,163 | $(12,132) | | Cash and cash equivalents at end of period | $13,752 | $24,698 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) - Trevi Therapeutics, Inc. is a clinical-stage biopharmaceutical company developing Haduvio (oral nalbuphine ER) for chronic cough in idiopathic pulmonary fibrosis (IPF), other chronic cough indications, and prurigo nodularis[29](index=29&type=chunk) - Haduvio is an oral extended-release formulation of nalbuphine, a mixed κ-opioid receptor agonist and μ-opioid receptor antagonist, approved as an injectable for pain for over 20 years and not scheduled as a controlled substance in the U.S[30](index=30&type=chunk) **Marketable Securities (Amounts in thousands)** | Type of Security | June 30, 2023 Fair Value | December 31, 2022 Fair Value | | :--------------------------------- | :------------------------------- | :------------------------------- | | Corporate bonds | $56,594 | $62,513 | | Commercial paper | $14,916 | $30,739 | | U.S. government agency securities | $4,939 | $2,903 | | U.S. treasury securities | $1,997 | $9,852 | | Asset backed securities | $1,954 | $1,914 | | Total marketable securities | $80,400 | $107,921 | - The company fully extinguished its SVB Term Loan on May 9, 2023, with a total payoff of **$6.5 million**, including principal, final payment fee, and accrued interest/prepayment premium[79](index=79&type=chunk)[149](index=149&type=chunk) **Stockholders' Equity - Shares Reserved for Future Issuance** | Category | June 30, 2023 | December 31, 2022 | | :--------------------------------- | :------------------ | :------------------ | | Common stock warrants and pre-funded warrants | 45,330,707 | 48,330,707 | | LPC Purchase Agreement sales | 30,000,000 | 30,000,000 | | 2019 Stock Incentive Plan | 6,528,753 | 4,553,202 | | 2019 Employee Stock Purchase Plan | 1,208,274 | 701,232 | | 2012 Stock Incentive Plan | 595,389 | 602,231 | | Total | 83,663,123 | 84,187,372 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company, a clinical-stage biopharmaceutical firm, is developing Haduvio for chronic cough in IPF and prurigo nodularis, with positive Phase 2 and Phase 2b/3 data reported, and expects existing cash to fund operations into 2026, despite ongoing net losses and the need for substantial additional funding - Trevi Therapeutics is a clinical-stage biopharmaceutical company developing Haduvio (oral nalbuphine ER) for chronic cough in idiopathic pulmonary fibrosis (IPF), other chronic cough indications, and prurigo nodularis[133](index=133&type=chunk) - Positive Phase 2 data for Haduvio in chronic cough in IPF (CANAL trial) showed a statistically significant reduction in daytime cough frequency (**p<0.0001**) and positive results for patient/clinician reported outcomes[134](index=134&type=chunk) - Positive Phase 2b/3 data for Haduvio in prurigo nodularis (PRISM trial) showed statistically significant results on primary and all three key secondary endpoints[137](index=137&type=chunk) - The Human Abuse Potential (HAP) study for oral nalbuphine ER is delayed due to a U.S. shortage of IV butorphanol, the comparator drug[140](index=140&type=chunk) **Key Financial Highlights (Amounts in thousands)** | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Net Loss | $(13,546) | $(15,381) | | Accumulated Deficit (as of June 30, 2023 / Dec 31, 2022) | $(223,615) | $(210,069) | | Cash, Cash Equivalents & Marketable Securities (as of June 30, 2023 / Dec 31, 2022) | $94,200 | $120,510 | - The company believes existing cash, cash equivalents, and marketable securities of **$94.2 million** will fund operating expenses and capital expenditure requirements into **2026**, but substantial additional funding is needed for continued development and commercialization[149](index=149&type=chunk)[193](index=193&type=chunk) [Components of Operating Results](index=31&type=section&id=Components%20of%20Operating%20Results) - Research and development (R&D) expenses are primarily for Haduvio development, including personnel, consulting, and contract manufacturing, and are expected to increase as the company advances clinical trials and prepares for regulatory approval and commercial launch[153](index=153&type=chunk)[154](index=154&type=chunk) - General and administrative (G&A) expenses consist of personnel, professional fees (legal, consulting, accounting), rent, and other operating costs, and are anticipated to increase due to expanded infrastructure and personnel[155](index=155&type=chunk)[156](index=156&type=chunk) - Other income (expense) includes interest income from cash and marketable securities, other income (e.g., employee retention tax credit, foreign currency gains, debt extinguishment effect), and interest expense from the now-extinguished SVB Term Loan[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk)[161](index=161&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) **Operating Results Comparison (Amounts in thousands)** | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change | | :--------------------------------- | :------------------------------- | :------------------------------- | :------- | | Research and development | $5,842 | $5,103 | $739 | | General and administrative | $2,540 | $2,717 | $(177) | | Net loss | $(7,145) | $(8,052) | $907 | | Interest income, net | $1,207 | $195 | $1,012 | | Interest expense | $(153) | $(295) | $142 | **Operating Results Comparison (Amounts in thousands)** | Metric | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change | | :--------------------------------- | :------------------------------- | :------------------------------- | :------- | | Research and development | $10,842 | $9,748 | $1,094 | | General and administrative | $5,103 | $5,097 | $6 | | Net loss | $(13,546) | $(15,381) | $1,835 | | Interest income, net | $2,428 | $199 | $2,229 | | Interest expense | $(384) | $(597) | $213 | - R&D expenses increased for both periods primarily due to increased consulting and professional fees for planned chronic cough trials and higher personnel-related and stock-based compensation expenses[164](index=164&type=chunk)[169](index=169&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) - The company's primary funding sources have been private placements of preferred stock and convertible notes, IPO proceeds, at-the-market (ATM) sales agreements, and private placements of common stock and warrants[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) **Cash, Cash Equivalents & Marketable Securities (Amounts in thousands)** | Metric | June 30, 2023 | | :--------------------------------- | :------------------ | | Cash, Cash Equivalents & Marketable Securities | $94,200 | - The company expects its current cash, cash equivalents, and marketable securities to fund operating expenses and capital expenditure requirements into **2026**[193](index=193&type=chunk) - Substantial additional funding will be required for future operations, including advancing Haduvio through clinical development, regulatory approval, and commercial launch activities, as well as for operating as a public company[190](index=190&type=chunk)[191](index=191&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that the company does not have material market risks requiring quantitative or qualitative disclosure beyond what is already presented in the financial statements - The company has no material quantitative or qualitative disclosures about market risk to report[201](index=201&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) As of June 30, 2023, management, with the participation of the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level, with no material changes in internal control over financial reporting during the quarter - As of June 30, 2023, the company's disclosure controls and procedures were deemed effective at the reasonable assurance level by management, including the CEO and CFO[202](index=202&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2023[203](index=203&type=chunk) [PART II. OTHER INFORMATION](index=38&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings - The company is not subject to any material legal proceedings[204](index=204&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) This section outlines numerous significant risks that could materially and adversely affect the company's business, financial condition, results of operations, and future growth prospects, spanning financial stability, product development, third-party reliance, intellectual property, regulatory compliance, employee matters, and common stock volatility [Risks Related to Our Financial Position and Need for Additional Capital](index=39&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Need%20for%20Additional%20Capital) - The company has incurred significant net losses since inception, with an accumulated deficit of **$223.6 million** as of June 30, 2023, and expects to continue incurring substantial losses, potentially never achieving profitability[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk) - Substantial additional funding is required to complete Haduvio's development and commercialization, and failure to raise capital on acceptable terms could force delays, reductions, or abandonment of product development programs[212](index=212&type=chunk)[214](index=214&type=chunk) - Existing cash, cash equivalents, and marketable securities are projected to fund operations into **2026**, but this estimate is subject to change, and additional financing may be needed sooner[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk) [Risks Related to the Development and Commercialization of Haduvio and Any Future Product Candidates](index=42&type=section&id=Risks%20Related%20to%20the%20Development%20and%20Commercialization%20of%20Haduvio%20and%20Any%20Future%20Product%20Candidates) - The company's prospects are highly dependent on the successful development and commercialization of Haduvio, its sole product candidate, for chronic cough in IPF, other chronic cough indications, and prurigo nodularis[221](index=221&type=chunk)[222](index=222&type=chunk) - Clinical drug development is a lengthy, expensive, and uncertain process, with risks including unfavorable or inconclusive trial results, regulatory requirements for additional trials, and delays in patient enrollment due to competition or off-label treatments[227](index=227&type=chunk)[228](index=228&type=chunk)[230](index=230&type=chunk)[243](index=243&type=chunk)[245](index=245&type=chunk)[246](index=246&type=chunk) - Haduvio, as a mixed κ-opioid receptor agonist and μ-opioid receptor antagonist, may be susceptible to psychiatric side effects, withdrawal effects, respiratory depression, and potential cardiac/endocrine risks, and its label will likely carry an opioid class warning for serious respiratory depression[250](index=250&type=chunk)[253](index=253&type=chunk) - There is a risk that Haduvio could be classified as a controlled substance by the DEA, or require a Risk Evaluation and Mitigation Strategy (REMS), which would impose restrictive marketing and distribution regulations, increasing costs and potentially limiting its use[254](index=254&type=chunk)[255](index=255&type=chunk)[257](index=257&type=chunk) [Risks Related to Our Dependence on Third Parties](index=54&type=section&id=Risks%20Related%20to%20Our%20Dependence%20on%20Third%20Parties) - The company relies on third parties (CROs, medical institutions, clinical investigators) to conduct clinical trials, limiting control over these activities and posing risks if they do not perform satisfactorily or comply with cGCPs[287](index=287&type=chunk)[288](index=288&type=chunk)[289](index=289&type=chunk)[290](index=290&type=chunk) - The company depends on third-party contract manufacturers for Haduvio's drug substance and product, including a single supplier (Mallinckrodt) for nalbuphine hydrochloride, creating risks of manufacturing delays, supply shortages, and non-compliance with cGMPs[291](index=291&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk)[296](index=296&type=chunk)[297](index=297&type=chunk) - Seeking collaborations for Haduvio's development and commercialization, especially for larger indications or international markets, involves risks such as collaborators not dedicating sufficient resources, potential disagreements, or termination of agreements[299](index=299&type=chunk)[300](index=300&type=chunk)[301](index=301&type=chunk)[304](index=304&type=chunk) [Risks Related to Our Intellectual Property](index=58&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) - The company's success relies on obtaining and maintaining patent protection for Haduvio, which is uncertain due to the expensive, time-consuming, and complex patent application and approval process, and the risk of challenges to patent validity or enforceability[309](index=309&type=chunk)[312](index=312&type=chunk)[314](index=314&type=chunk) - Disputes over licensed intellectual property, including scope of rights or diligence obligations, could lead to loss of critical license rights or damages, materially impacting the business[307](index=307&type=chunk)[308](index=308&type=chunk) - The company faces risks of lawsuits for infringing third-party intellectual property rights, which could be costly, time-consuming, and prevent or delay Haduvio's development or commercialization, or require obtaining licenses on unfavorable terms[321](index=321&type=chunk)[323](index=323&type=chunk)[324](index=324&type=chunk) - Changes in patent laws (e.g., America Invents Act, E.U. unitary patent system) or their interpretation, and difficulties in enforcing intellectual property rights globally, could diminish the value of patents and competitive advantage[325](index=325&type=chunk)[328](index=328&type=chunk)[329](index=329&type=chunk)[330](index=330&type=chunk) [Risks Related to Regulatory Approval and Other Legal Compliance Matters](index=63&type=section&id=Risks%20Related%20to%20Regulatory%20Approval%20and%20Other%20Legal%20Compliance%20Matters) - The regulatory approval process for Haduvio is expensive, lengthy, and uncertain, with no guarantee of approval or that the company will qualify for the Section 505(b)(2) pathway, which could significantly delay and increase the cost of development[339](index=339&type=chunk)[340](index=340&type=chunk)[344](index=344&type=chunk)[345](index=345&type=chunk) - Post-marketing, Haduvio will be subject to ongoing stringent regulations, including restrictions on promotion for unapproved uses, compliance with cGMPs, and potential post-marketing studies or withdrawal from the market, with non-compliance leading to substantial penalties[357](index=357&type=chunk)[360](index=360&type=chunk)[361](index=361&type=chunk)[365](index=365&type=chunk)[366](index=366&type=chunk)[367](index=367&type=chunk) - Inadequate funding for regulatory agencies (FDA, SEC) or government shutdowns could delay product reviews and approvals, adversely impacting the business[369](index=369&type=chunk)[370](index=370&type=chunk)[372](index=372&type=chunk) - Current and future healthcare legislation (e.g., ACA, IRA) and pricing reforms may limit product prices, reduce reimbursement, and increase compliance costs, negatively impacting revenue and profitability[373](index=373&type=chunk)[374](index=374&type=chunk)[375](index=375&type=chunk)[378](index=378&type=chunk)[379](index=379&type=chunk)[383](index=383&type=chunk)[384](index=384&type=chunk) - Relationships with healthcare providers and third-party payors are subject to complex anti-kickback, fraud and abuse, and privacy laws (e.g., HIPAA, GDPR, CCPA), with non-compliance risking criminal sanctions, civil penalties, and reputational harm[389](index=389&type=chunk)[390](index=390&type=chunk)[391](index=391&type=chunk)[392](index=392&type=chunk)[393](index=393&type=chunk)[394](index=394&type=chunk)[398](index=398&type=chunk)[400](index=400&type=chunk)[401](index=401&type=chunk)[404](index=404&type=chunk) [Risks Related to Employee Matters and Managing our Growth](index=77&type=section&id=Risks%20Related%20to%20Employee%20Matters%20and%20Managing%20our%20Growth) - The company's success is highly dependent on retaining key executive, scientific, clinical, manufacturing, and sales/marketing personnel, and competition for such talent is intense[418](index=418&type=chunk)[420](index=420&type=chunk)[421](index=421&type=chunk) - Expanding the organization, particularly for commercialization, poses management challenges, including potential infrastructure weaknesses, operational mistakes, and diversion of financial resources[422](index=422&type=chunk) - The company is exposed to risks of fraud or misconduct by employees, independent contractors, and consultants, including non-compliance with regulatory standards, which could lead to significant liability and reputational harm[423](index=423&type=chunk) [Risks Related to Our Common Stock](index=77&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) - An active trading market for the company's common stock may not be sustainable, and its trading price is highly volatile, influenced by factors such as clinical trial results, regulatory actions, and general market conditions[424](index=424&type=chunk)[430](index=430&type=chunk)[431](index=431&type=chunk)[432](index=432&type=chunk) - Failure to comply with Nasdaq's continued listing requirements, such as the minimum bid price, could lead to delisting, reducing liquidity and negatively impacting the stock price and access to capital markets[425](index=425&type=chunk)[429](index=429&type=chunk) - Future sales of common stock by the company (e.g., through shelf registration, ATM sales) or by significant stockholders (e.g., private placement investors, warrant exercises) could dilute existing ownership and depress the market price of the stock[435](index=435&type=chunk)[439](index=439&type=chunk)[445](index=445&type=chunk) - The significant number of shares underlying outstanding warrants could negatively affect the common stock's market price and make future equity offerings more difficult, and in a sale of the company, warrant holders might receive disproportionately higher consideration[446](index=446&type=chunk)[448](index=448&type=chunk)[449](index=449&type=chunk) - Ownership of common stock is concentrated among executive officers and directors (approximately **35.6%**), potentially limiting new investors' influence over significant corporate decisions[450](index=450&type=chunk) [Item 6. Exhibits](index=85&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the restated certificate of incorporation, amended and restated bylaws, certifications of principal executive and financial officers, and various Inline XBRL documents - The exhibits include the Restated Certificate of Incorporation, Amended and Restated Bylaws, certifications of principal executive and financial officers (pursuant to Sarbanes-Oxley Act sections 302 and 906), and Inline XBRL documents[466](index=466&type=chunk)[467](index=467&type=chunk) [Signatures](index=88&type=section&id=Signatures) The report is signed by Jennifer L. Good, President and Chief Executive Officer, and Lisa Delfini, Chief Financial Officer, on behalf of Trevi Therapeutics, Inc. as of August 10, 2023 - The report is signed by Jennifer L. Good, President and Chief Executive Officer, and Lisa Delfini, Chief Financial Officer, on August 10, 2023[471](index=471&type=chunk)

Trevi Therapeutics, Inc. (NASDAQ:TRVI) Q1 2023 Earnings Conference Call May 11, 2023 4:30 PM ET Company Participants Jennifer Good – President and Chief Executive Officer Lisa Delfini – Chief Financial Officer Conference Call Participants Serge Belanger – Needham & Company Sean Kim – Jones Trading Annabel Samimy – Stifel Operator Good afternoon and welcome to the Trevi Therapeutics’ Q1 2023 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. Various remarks that manag ...

[PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%2E%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=6&type=section&id=Item%201%2E%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents Trevi Therapeutics' unaudited condensed consolidated financial statements for Q1 2023 and 2022, including balance sheets, comprehensive loss, equity, and cash flows, with detailed notes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a decrease in total assets from $123,015 thousand at December 31, 2022, to $116,205 thousand at March 31, 2023, primarily driven by a reduction in marketable securities and cash and cash equivalents | Metric (in thousands) | March 31, 2023 | December 31, 2022 | | :-------------------- | :------------- | :---------------- | | Cash and cash equivalents | $11,651 | $12,589 | | Marketable securities | $99,607 | $107,921 | | Total current assets | $114,201 | $122,616 | | Total assets | $116,205 | $123,015 | | Total current liabilities | $13,201 | $13,400 | | Total liabilities | $14,473 | $15,556 | | Total stockholders' equity| $101,732 | $107,459 | [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) The company reported a net loss of $6,401 thousand for the three months ended March 31, 2023, an improvement from the $7,329 thousand net loss in the prior-year period | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (YoY) | | :-------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Research and development | $5,000 | $4,645 | +$355 | | General and administrative | $2,563 | $2,380 | +$183 | | Total operating expenses | $7,563 | $7,025 | +$538 | | Loss from operations | $(7,563) | $(7,025) | -$(538) | | Other income, net | $165 | $0 | +$165 | | Interest income, net | $1,221 | $4 | +$1,217 | | Interest expense | $(231) | $(302) | +$71 | | Total other income (expense), net | $1,155 | $(309) | +$1,464 | | Net loss | $(6,401) | $(7,329) | +$928 | | Basic and diluted net loss per common share | $(0.06) | $(0.24) | +$0.18 | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity decreased from $107,459 thousand at December 31, 2022, to $101,732 thousand at March 31, 2023, primarily due to the net loss incurred during the period | Metric (in thousands) | December 31, 2022 | March 31, 2023 | | :-------------------- | :---------------- | :------------- | | Common Stock | $60 | $60 | | Additional Paid-in Capital | $317,590 | $318,230 | | Accumulated Other Comprehensive Loss | $(122) | $(88) | | Accumulated Deficit | $(210,069) | $(216,470) |\ | Total Stockholders' Equity | $107,459 | $101,732 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities increased to $8,197 thousand for the three months ended March 31, 2023, from $7,092 thousand in the prior-year period | Cash Flow Activity (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (YoY) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Net cash used in operating activities | $(8,197) | $(7,092) | -$(1,105) | | Net cash provided by investing activities | $8,962 | $0 | +$8,962 | | Net cash used in financing activities | $(1,703) | $(625) | -$(1,078) | | Net decrease in cash and cash equivalents | $(938) | $(7,717) | +$6,779 | | Cash and cash equivalents at end of period | $11,651 | $29,113 | -$(17,462) | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed information on the company's business, accounting policies, and specific financial items, including Haduvio's focus, marketable securities, and the SVB Term Loan extinguishment - Trevi Therapeutics is a clinical-stage biopharmaceutical company focused on developing Haduvio (oral nalbuphine ER) for chronic cough in idiopathic pulmonary fibrosis (IPF), other chronic cough indications, and prurigo nodularis[27](index=27&type=chunk) - Haduvio's active ingredient, nalbuphine, is a mixed κ-opioid receptor agonist and μ-opioid receptor antagonist, which mitigates abuse risk associated with μ-opioid agonists and is not scheduled as a controlled substance in the U.S. and most of Europe[28](index=28&type=chunk) Marketable Securities (in thousands) | Type of Security | March 31, 2023 Fair Value | December 31, 2022 Fair Value | | :---------------- | :------------------------ | :------------------------- | | Corporate bonds | $65,766 | $62,513 | | Commercial paper | $19,001 | $30,739 | | U.S. treasury securities | $7,952 | $9,852 | | U.S. government agency securities | $4,955 | $2,903 | | Asset backed securities | $1,933 | $1,914 | | **Total marketable securities** | **$99,607** | **$107,921** | - The SVB Term Loan was fully extinguished on **May 9, 2023**, with a total payoff amount of **$6.5 million**, including **$5.2 million** remaining principal, a **$1.2 million** final payment fee, and **$0.1 million** accrued interest and prepayment premium[127](index=127&type=chunk) Interest Expense on SVB Term Loan (in thousands) | Component | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Interest payments | $150 | $148 | | Accrual of the final payment fee | $59 | $117 | | Accretion and amortization of term loan discounts | $22 | $37 | | **Total Interest Expense** | **$231** | **$302** | | Weighted average interest rate | 10.68% | 4.25% | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202%2E%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and operational results, highlighting Haduvio's clinical development, recent financial performance, liquidity, and future funding requirements - Trevi Therapeutics is a clinical-stage biopharmaceutical company focused on developing Haduvio (oral nalbuphine ER) for chronic cough in idiopathic pulmonary fibrosis (IPF) and other chronic cough indications, and for the treatment of prurigo nodularis[131](index=131&type=chunk) - The company announced positive data from its Phase 2 CANAL trial for chronic cough in IPF in **September 2022**, showing statistically significant results for daytime cough frequency reduction (p<0.0001)[132](index=132&type=chunk)[133](index=133&type=chunk) - Positive results were also reported in **June 2022** from the Phase 2b/3 PRISM trial of Haduvio in prurigo nodularis, meeting primary and all three key secondary endpoints[136](index=136&type=chunk) - The company initiated a human abuse potential (HAP) study in **Q4 2022** for oral nalbuphine and expects top-line data by the **end of 2023**, subject to regulatory input and butorphanol supply[138](index=138&type=chunk) - As of March 31, 2023, the company had an accumulated deficit of **$216.5 million** and has not generated product revenue, expecting to incur significant losses for the foreseeable future[139](index=139&type=chunk) [Overview](index=25&type=section&id=Overview) The overview details the company's core focus on Haduvio for chronic cough in IPF and prurigo nodularis, highlighting positive Phase 2 data, ongoing studies, and historical financial performance - The company plans to initiate a Phase 2b dose-ranging trial for chronic cough in IPF and a Phase 1b trial to evaluate respiratory physiology in IPF patients in the **second half of 2023**, pending FDA agreement[134](index=134&type=chunk) - A Phase 2a clinical trial for refractory chronic cough is expected to commence in **Q3 2023** in the U.K., studying escalating doses of Haduvio over three weeks[135](index=135&type=chunk) - The company completed the open-label extension of the Phase 2b/3 PRISM trial for prurigo nodularis in **Q1 2023** and plans to request an end-of-Phase 2 meeting with the FDA in **2023** to determine next steps, including potential strategic collaborations for further development[137](index=137&type=chunk) - As of March 31, 2023, cash, cash equivalents, and marketable securities totaled **$111.3 million**, expected to fund operating expenses and capital expenditures into **2026**[147](index=147&type=chunk)[148](index=148&type=chunk) [Components of Operating Results](index=28&type=section&id=Components%20of%20Operating%20Results) This section outlines the primary components of the company's operating results: Research and Development (R&D) expenses, General and Administrative (G&A) expenses, and Other Income (Expense), Net - R&D expenses are primarily for Haduvio's development, including payroll, consulting, and contract manufacturing, and are not allocated by specific indication due to broad support activities[151](index=151&type=chunk) - G&A expenses consist of personnel costs, professional fees (legal, consulting, accounting), rent, and other operating expenses[153](index=153&type=chunk) - Other income, net for Q1 2023 included income from an employee retention tax credit under the CARES Act[156](index=156&type=chunk) - Interest income, net, is derived from cash, cash equivalents, and marketable securities, while interest expense relates to the SVB Term Loan, including amortization of deferred financing charges and accrual of the final payment fee[158](index=158&type=chunk)[159](index=159&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of the company's operating results for the three months ended March 31, 2023, versus 2022, highlighting expense increases and net loss improvement Operating Results Comparison (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (YoY) | | :-------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Research and development | $5,000 | $4,645 | +$355 | | General and administrative | $2,563 | $2,380 | +$183 | | Total operating expenses | $7,563 | $7,025 | +$538 | | Loss from operations | $(7,563) | $(7,025) | -$(538) | | Total other income (expense), net | $1,155 | $(309) | +$1,464 | | Net loss | $(6,401) | $(7,329) | +$928 | - R&D expenses increased by **$0.355 million** YoY, driven by higher consulting and professional fees for planned chronic cough trials and increased personnel-related expenses, partially offset by lower clinical development expenses due to trial completions[163](index=163&type=chunk) - G&A expenses increased by **$0.183 million** YoY, primarily due to higher personnel-related expenses and tax professional fees[164](index=164&type=chunk) - Other income, net, improved by **$1.464 million** YoY, mainly due to a **$1.2 million** increase in interest income from higher cash/marketable securities balances and yields, and a **$0.2 million** employee retention tax credit[165](index=165&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's historical and current funding sources, including the recent extinguishment of the SVB Term Loan, and outlines future funding requirements for Haduvio's development - Since inception, the company has incurred significant operating losses and negative cash flows, financing operations through private placements, IPO, ATM sales, and term loans[166](index=166&type=chunk) - The SVB Term Loan, initially **$14.0 million**, was fully repaid on **May 9, 2023**, for **$6.5 million**, including principal, final payment fee, and accrued interest/prepayment premium[146](index=146&type=chunk)[171](index=171&type=chunk) - As of March 31, 2023, the company held **$111.3 million** in cash, cash equivalents, and marketable securities, projected to fund operations into **2026**[147](index=147&type=chunk)[148](index=148&type=chunk)[183](index=183&type=chunk) - Substantial additional funding will be required for Haduvio's clinical development (IPF chronic cough, refractory chronic cough, HAP study), regulatory approval, and potential commercial launch activities[149](index=149&type=chunk)[150](index=150&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk) [Critical Accounting Policies and Use of Estimates](index=34&type=section&id=Critical%20Accounting%20Policies%20and%20Use%20of%20Estimates) This section reiterates that the company's financial statements are prepared using U.S. GAAP, requiring management estimates and assumptions, with no material changes noted for Q1 2023 - The preparation of financial statements requires management to make estimates and assumptions, particularly for R&D expenses, stock-based compensation, income taxes, warrants, and fair value measurements[188](index=188&type=chunk)[189](index=189&type=chunk) - No material changes to critical accounting policies occurred during the three months ended March 31, 2023[189](index=189&type=chunk) [Recently Adopted Accounting Pronouncements](index=34&type=section&id=Recently%20Adopted%20Accounting%20Pronouncements) There were no new accounting pronouncements adopted by the company during the three months ended March 31, 2023 - No new accounting pronouncements were adopted during the three months ended March 31, 2023[190](index=190&type=chunk) [Recently Issued Accounting Pronouncements](index=34&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) There were no new accounting pronouncements issued during the three months ended March 31, 2023, that are expected to materially impact the company's condensed consolidated financial statements - No new accounting pronouncements were issued during the three months ended March 31, 2023, that are expected to materially impact the financial statements[191](index=191&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there are no quantitative and qualitative disclosures about market risk applicable to the company - The company has no applicable quantitative and qualitative disclosures about market risk[192](index=192&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204%2E%20Controls%20and%20Procedures) Management evaluated the effectiveness of disclosure controls and procedures as of March 31, 2023, concluding they were effective, with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated as **effective** at the reasonable assurance level as of **March 31, 2023**[193](index=193&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2023[194](index=194&type=chunk) [PART II. OTHER INFORMATION](index=35&type=section&id=PART%20II%2E%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=35&type=section&id=Item%201%2E%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings - The company is not subject to any material legal proceedings[195](index=195&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A%2E%20Risk%20Factors) This section outlines numerous risks that could materially affect the company's actual results, including those related to its financial position, Haduvio's development, third-party reliance, intellectual property, regulatory approvals, employee matters, and common stock volatility - The company has incurred significant losses since inception, with a net loss of **$6.4 million** for Q1 2023 and an accumulated deficit of **$216.5 million** as of March 31, 2023[197](index=197&type=chunk) - Future profitability is uncertain and dependent on successful development, marketing approval, and commercialization of Haduvio, which will require substantial additional funding[199](index=199&type=chunk)[203](index=203&type=chunk)[206](index=206&type=chunk) - The company is highly dependent on Haduvio, its sole product candidate, and its success is critical for the business[213](index=213&type=chunk) - Clinical drug development is lengthy, expensive, and uncertain, with risks including unfavorable trial results, enrollment delays, unexpected side effects, and regulatory hurdles[218](index=218&type=chunk)[219](index=219&type=chunk) - The company relies heavily on third parties for clinical trials and manufacturing, including a single supplier for Haduvio's active ingredient, posing risks of delays or supply interruptions[281](index=281&type=chunk)[284](index=284&type=chunk)[286](index=286&type=chunk) [Risks Related to Our Financial Position and Need for Additional Capital](index=35&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Need%20for%20Additional%20Capital) This section details the company's history of significant losses and accumulated deficit, emphasizing the ongoing need for substantial additional funding to support Haduvio's development and potential commercialization - The company has incurred significant annual net losses since inception, with an accumulated deficit of **$216.5 million** as of March 31, 2023[197](index=197&type=chunk) - Substantial additional funding is required for ongoing operations, including Haduvio's clinical trials (IPF chronic cough, refractory chronic cough, HAP study), regulatory approvals, and commercial launch activities[203](index=203&type=chunk)[204](index=204&type=chunk) - Failure to raise sufficient capital on acceptable terms could force delays, reductions, or abandonment of product development programs or commercialization efforts[205](index=205&type=chunk)[206](index=206&type=chunk) - Raising additional capital through equity sales may dilute stockholders, while debt financing could impose restrictive covenants and fixed payment obligations[210](index=210&type=chunk)[211](index=211&type=chunk) [Risks Related to the Development and Commercialization of Haduvio and Any Future Product Candidates](index=38&type=section&id=Risks%20Related%20to%20the%20Development%20and%20Commercialization%20of%20Haduvio%20and%20Any%20Future%20Product%20Candidates) This section outlines the extensive risks associated with Haduvio's development and commercialization, including its sole product candidate status, unproven approach, lengthy clinical trials, potential adverse events, and market challenges - The company's prospects are entirely dependent on the successful development and commercialization of Haduvio, its sole product candidate, for chronic cough in IPF, other chronic cough indications, and prurigo nodularis[213](index=213&type=chunk)[214](index=214&type=chunk) - Haduvio's approach for chronic cough is unproven, as nalbuphine is not approved for this indication and has only been marketed as an injectable for pain[217](index=217&type=chunk) - Clinical trials are expensive, lengthy, and uncertain, with risks including unfavorable results, enrollment delays (exacerbated by COVID-19), and the need for additional trials[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk)[235](index=235&type=chunk) - Haduvio, as a mixed κ-opioid receptor agonist and μ-opioid receptor antagonist, may cause psychiatric side effects, withdrawal effects, respiratory depression, and potential cardiac/endocrine risks, and its label will likely carry an opioid class warning[240](index=240&type=chunk)[241](index=241&type=chunk)[244](index=244&type=chunk) - The FDA may require a Risk Evaluation and Mitigation Strategy (REMS) or classify Haduvio as a controlled substance, which could restrict its use, increase commercialization costs, and limit market potential[245](index=245&type=chunk)[246](index=246&type=chunk)[249](index=249&type=chunk) - Market acceptance by physicians, patients, and payors is uncertain, and competition from existing and pipeline therapies (e.g., Dupixent for prurigo nodularis, orvepitant for chronic cough) is substantial[256](index=256&type=chunk)[267](index=267&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk) [Risks Related to Our Dependence on Third Parties](index=47&type=section&id=Risks%20Related%20to%20Our%20Dependence%20on%20Third%20Parties) This section highlights the company's significant reliance on third parties for clinical trials, manufacturing, storage, packaging, and distribution of Haduvio, detailing risks of performance issues and supply chain disruptions - The company relies on third-party CROs, medical institutions, and clinical investigators to conduct clinical trials, limiting control over these activities and posing risks of delays or non-compliance with cGCPs[281](index=281&type=chunk)[282](index=282&type=chunk)[283](index=283&type=chunk) - Reliance on contract manufacturers for drug substance and product, including a single supplier (Mallinckrodt) for nalbuphine hydrochloride, creates risks of manufacturing delays, supply interruptions, and increased costs[284](index=284&type=chunk)[285](index=285&type=chunk)[286](index=286&type=chunk) - Mallinckrodt's recent emergence from bankruptcy adds uncertainty regarding its ability to continue supplying nalbuphine hydrochloride drug substance[286](index=286&type=chunk) - Establishing collaborations for Haduvio's development and commercialization (especially for larger indications or ex-U.S. markets) is critical but faces significant competition and risks of unfavorable terms or collaborator non-performance[291](index=291&type=chunk)[292](index=292&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk) [Risks Related to Our Intellectual Property](index=54&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) This section addresses the critical importance of intellectual property (IP) protection for Haduvio and future product candidates, outlining risks related to license agreements, patent protection, validity challenges, and infringement lawsuits - Failure to comply with obligations under the exclusive license agreement with Endo Pharmaceuticals Inc. for nalbuphine hydrochloride could lead to loss of critical license rights or damages[297](index=297&type=chunk)[298](index=298&type=chunk) - Obtaining and maintaining sufficient patent protection for Haduvio is crucial but uncertain due to the expensive and time-consuming process, potential challenges to validity, and varying interpretations of patent laws[301](index=301&type=chunk)[303](index=303&type=chunk)[305](index=305&type=chunk) - Competitors may develop similar products, circumvent patents, or seek generic approvals, potentially eroding competitive advantage[308](index=308&type=chunk) - Inability to protect trade secrets through confidentiality agreements could harm the business if proprietary information is disclosed or independently developed by competitors[310](index=310&type=chunk) - Intellectual property litigation (infringement claims, counterclaims, validity challenges) is costly, time-consuming, and uncertain, potentially diverting resources and harming business[311](index=311&type=chunk)[312](index=312&type=chunk)[314](index=314&type=chunk) - Changes in patent laws (e.g., America Invents Act, EU unitary patent system) and difficulties in enforcing IP rights globally (e.g., Russia's decree on inventions) could diminish patent value and competitive position[316](index=316&type=chunk)[317](index=317&type=chunk)[319](index=319&type=chunk)[320](index=320&type=chunk)[321](index=321&type=chunk)[323](index=323&type=chunk) [Risks Related to Regulatory Approval and Other Legal Compliance Matters](index=59&type=section&id=Risks%20Related%20to%20Regulatory%20Approval%20and%20Other%20Legal%20Compliance%20Matters) This section details the extensive and complex regulatory landscape governing drug development and commercialization, covering risks related to approval pathways, clinical trial data, post-marketing regulations, and compliance with various healthcare laws - If Haduvio does not qualify for the Section 505(b)(2) regulatory pathway, the approval process would be significantly longer, more costly, and riskier[331](index=331&type=chunk)[332](index=332&type=chunk) - The regulatory approval process is expensive, time-consuming, and uncertain, with no guarantee of approval, and any approval may be limited or subject to restrictions[335](index=335&type=chunk)[336](index=336&type=chunk)[337](index=337&type=chunk) - Data from clinical trials conducted outside the U.S. may not be accepted by the FDA, potentially requiring additional costly and time-consuming trials[339](index=339&type=chunk) - Post-marketing regulations, including restrictions on promotion for unapproved uses, cGMP compliance, and potential withdrawal from the market, could limit revenue generation and lead to substantial penalties[347](index=347&type=chunk)[348](index=348&type=chunk)[350](index=350&type=chunk)[351](index=351&type=chunk)[354](index=354&type=chunk)[356](index=356&type=chunk) - Inadequate funding or disruptions at regulatory agencies (FDA, SEC) could delay reviews and approvals, negatively impacting business operations[357](index=357&type=chunk)[358](index=358&type=chunk)[359](index=359&type=chunk)[360](index=360&type=chunk)[361](index=361&type=chunk) - Healthcare reform initiatives (e.g., ACA, IRA) and legislative efforts to control drug prices could increase costs, reduce reimbursement, and adversely affect profitability[362](index=362&type=chunk)[363](index=363&type=chunk)[367](index=367&type=chunk)[368](index=368&type=chunk)[371](index=371&type=chunk)[372](index=372&type=chunk)[375](index=375&type=chunk) - Relationships with healthcare providers and payors are subject to anti-kickback, fraud and abuse, and privacy laws (HIPAA, GDPR, CCPA), with non-compliance leading to significant penalties and reputational harm[377](index=377&type=chunk)[378](index=378&type=chunk)[379](index=379&type=chunk)[380](index=380&type=chunk)[381](index=381&type=chunk)[382](index=382&type=chunk)[385](index=385&type=chunk)[386](index=386&type=chunk)[387](index=387&type=chunk) [Risks Related to Employee Matters and Managing our Growth](index=71&type=section&id=Risks%20Related%20to%20Employee%20Matters%20and%20Managing%20our%20Growth) This section highlights the company's dependence on its executive team and key personnel, the challenges of attracting and retaining talent, and the difficulties associated with managing organizational growth and preventing employee misconduct - The company's future success is highly dependent on retaining its executive team and attracting, retaining, and motivating qualified scientific, clinical, manufacturing, and sales/marketing personnel[401](index=401&type=chunk)[402](index=402&type=chunk)[403](index=403&type=chunk) - Expected significant growth in employees and operations, particularly for commercialization, may lead to difficulties in management, infrastructure weaknesses, and diversion of financial resources[404](index=404&type=chunk) - The company is exposed to risks of employee misconduct, including fraud or non-compliance with regulatory standards, which could result in significant liability and reputational harm[405](index=405&type=chunk) [Risks Related to Our Common Stock](index=72&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) This section addresses risks related to the company's common stock, including market sustainability, Nasdaq listing compliance, price volatility, future stock sales, dilutive warrants, and ownership concentration - An active trading market for the common stock may not be sustainable, potentially leading to downward pressure on the stock price and affecting capital raising ability[406](index=406&type=chunk) - Failure to comply with Nasdaq's continued listing requirements, such as the minimum bid price, could result in delisting, reduced liquidity, and negative impact on stock price and capital access[407](index=407&type=chunk)[408](index=408&type=chunk)[412](index=412&type=chunk) - The trading price of the common stock is highly volatile, influenced by clinical trial results, regulatory actions, competition, financing efforts, and broader market conditions[413](index=413&type=chunk)[414](index=414&type=chunk)[415](index=415&type=chunk) - Future sales of substantial shares by the company, employees, or significant stockholders (including through ATM sales, private placements, or warrant exercises) could negatively affect the stock price due to dilution or market perception[418](index=418&type=chunk)[421](index=421&type=chunk)[423](index=423&type=chunk)[430](index=430&type=chunk) - The significant number of shares underlying outstanding warrants could negatively affect the market price and make future equity offerings more difficult, and warrant holders may receive disproportionate consideration in a sale of the company[431](index=431&type=chunk)[432](index=432&type=chunk)[433](index=433&type=chunk)[435](index=435&type=chunk) - Ownership concentration among executive officers and directors (approx. **37.6%** as of **May 11, 2023**) could significantly influence corporate decisions and potentially prevent changes in control[436](index=436&type=chunk) [Risks Related to Our Business Operations](index=78&type=section&id=Risks%20Related%20to%20Our%20Business%20Operations) This section addresses operational risks including the impact of health epidemics, system failures, generic competition, increased public company costs, and limitations on utilizing net operating loss carryforwards - Health epidemics, such as COVID-19, have delayed clinical trials (e.g., Phase 2 CANAL trial) and disrupted business operations, with potential for future adverse impacts on patient enrollment, regulatory activities, and financial markets[453](index=453&type=chunk)[455](index=455&type=chunk)[456](index=456&type=chunk) - System failures, cyberattacks, or data breaches could disrupt operations, lead to loss of sensitive data (intellectual property, clinical trial data, personal health information), incur liabilities, and damage reputation[396](index=396&type=chunk)[397](index=397&type=chunk) - Approval of generic versions of Haduvio or other small molecule products, or insufficient exclusivity periods, could adversely affect future revenue and profitability[398](index=398&type=chunk)[400](index=400&type=chunk) - Operating as a public company incurs increased legal, accounting, and investor relations costs, and requires substantial management time for compliance initiatives and corporate governance[439](index=439&type=chunk)[440](index=440&type=chunk) - The company may not be able to utilize a significant portion of its federal and state net operating loss carryforwards (**$178.4 million** as of Dec 31, 2022) and R&D tax credit carryforwards (**$5.4 million**) due to ownership changes (Section 382 limitations) and tax law changes[442](index=442&type=chunk)[443](index=443&type=chunk)[444](index=444&type=chunk) [Item 5. Other Information](index=82&type=section&id=Item%205%2E%20Other%20Information) This section discloses the full extinguishment of the SVB Term Loan on May 9, 2023, for a total payoff amount of $6.5 million, including principal, fees, and accrued interest - The SVB Term Loan was fully extinguished on **May 9, 2023**[457](index=457&type=chunk) SVB Term Loan Payoff Amount (in millions) | Component | Amount | | :-------------------- | :----- | | Remaining principal | $5.2 | | Final payment fee | $1.2 | | Accrued interest and prepayment premium | $0.1 | | **Total Payoff Amount** | **$6.5** | - All liens and security interests related to the SVB Loan Agreement were terminated upon payoff[458](index=458&type=chunk) [Item 6. Exhibits](index=82&type=section&id=Item%206%2E%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer, and various Inline XBRL documents - Exhibits include certifications from the Principal Executive Officer and Principal Financial Officer (31.1, 31.2, 32.1, 32.2) and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[460](index=460&type=chunk) [Signatures](index=83&type=section&id=Signatures) The report is signed by Jennifer L. Good, President and Chief Executive Officer, and Lisa Delfini, Chief Financial Officer, on May 11, 2023 - The report was signed by Jennifer L. Good (President and CEO) and Lisa Delfini (CFO) on **May 11, 2023**[464](index=464&type=chunk)

Trevi Therapeutics, Inc. (NASDAQ:TRVI) Q4 2022 Earnings Conference Call March 16, 2023 8:30 AM ET Company Participants Jennifer Good - President & Chief Executive Officer Lisa Delfini - Chief Financial Officer David Clark - Chief Medical Officer Conference Call Participants Leland Gershell - Oppenheimer Nat Charoensook - SVB Securities Sean Kim - Jones Trading Mayank Mamtani - B. Riley Securities Operator Good afternoon and welcome to the Trevi Therapeutics Q4 and Year-End 2022 Earnings Conference Call. [Op ...

Financial Performance - The company reported an accumulated deficit of $210.1 million as of December 31, 2022, primarily due to research and development and general and administrative expenses [509]. - The company has not generated any revenue from product sales and has incurred net losses each year since its inception [509]. - Net loss for the year ended December 31, 2022, was $29.2 million, compared to a net loss of $33.9 million in 2021, reflecting an improvement of $4.8 million [533]. - Interest income increased by $1.7 million to $1.7 million in 2022, primarily due to higher cash equivalents and marketable securities balances [536]. - Other income, net for 2022 was $0.7 million, compared to other expense, net of $1.5 million in 2021, mainly due to the absence of a $0.4 million expense recorded in 2021 related to shares issued to Lincoln Park [536]. - Total operating expenses for 2022 were $29.9 million, a decrease of $2.6 million from $32.5 million in 2021 [533]. Research and Development - The Phase 2 CANAL trial for Haduvio demonstrated statistically significant results for daytime cough frequency reduction (p<0.0001) with 38 subjects enrolled [503]. - A Phase 2 clinical trial for Haduvio targeting refractory chronic cough is expected to commence in the third quarter of 2023 [505]. - The Phase 2b/3 PRISM trial for prurigo nodularis showed statistically significant results on all primary and secondary endpoints [506]. - The company expects to conduct an additional Phase 3 clinical trial to support NDA submissions for Haduvio for prurigo nodularis [507]. - The company anticipates an increase in research and development expenses as it pursues regulatory approval and prepares for a potential commercial launch of Haduvio [524]. - Research and development expenses decreased by $3.2 million, or 13.7%, to $19.8 million in 2022 from $23.0 million in 2021, primarily due to reduced clinical trial costs [534]. Funding and Cash Flow - As of December 31, 2022, the company had cash, cash equivalents, and marketable securities totaling $120.5 million [516]. - The company may need substantial additional funding to support ongoing operations and growth strategy [518]. - The company expects to incur substantial expenditures for clinical development and regulatory approval of Haduvio, impacting future funding needs [552][553]. - The company has no committed external funding sources and will need to secure additional financing through various means [558]. - The company believes existing cash and marketable securities will fund operations into 2026, excluding costs for additional clinical trials [556]. - Net cash used in operating activities was $28.2 million, a decrease from $28.9 million in 2021 [546][547]. - Net cash used in investing activities for 2022 was $107.4 million, primarily for marketable securities [549]. - Net cash provided by financing activities in 2022 was $111.3 million, significantly up from $20.8 million in 2021 [550][551]. Debt and Obligations - The SVB Term Loan requires interest-only payments until March 2022, with full repayment due by February 1, 2024 [532]. - The SVB Term Loan was originally $14.0 million with an interest rate of either the prime rate plus 1.00% or 4.25% [542]. - The SVB Loan Agreement includes restrictive covenants that may limit the company's operational flexibility [559]. - Failure to raise sufficient capital could lead to delays or abandonment of product development programs [559]. Accounting and Financial Reporting - Financial statements prepared in accordance with U.S. GAAP, requiring estimates and assumptions affecting reported amounts of assets and liabilities [560]. - Research and development expenses are expensed as incurred, with nonrefundable advance payments deferred and capitalized [562]. - Stock-based compensation expense recognized using fair value-based method, influenced by stock price and various complex variables [564]. - Fair value estimates of financial instruments made at a specific point in time, with cash and cash equivalents considered representative of fair value [576]. - No new accounting pronouncements adopted during the year ended December 31, 2022, materially impacting consolidated financial statements [580]. - Company has elected not to avail itself of the JOBS Act exemption, subjecting it to the same new or revised accounting standards as other public companies [579]. - Research and development accruals estimated based on service levels performed and study progress, included in accrued expenses [563]. - Fair value measurements categorized into three levels, with Level 1 being quoted prices in active markets and Level 3 involving unobservable inputs [578]. - Company assesses uncertain tax positions based on sustainability and measures at the largest amount of benefit greater than fifty percent likely to be realized [573]. - Stock options' expected term estimated using the "simplified method," averaging the vesting term and original contractual term [567].

Financial Data and Key Metrics Changes - In Q3 2022, the company reported a net loss of $8.3 million, compared to a net loss of $7.3 million in Q3 2021, indicating a year-over-year increase in losses [17] - R&D expenses rose to $5.8 million in Q3 2022 from $4.7 million in the same period of 2021, primarily due to start-up activities for planned trials [17] - G&A expenses increased to $2.6 million in Q3 2022 from $2.2 million in Q3 2021, attributed to higher legal fees and increased market research costs [18] - The company raised approximately $55 million in gross proceeds from a public offering and received an additional $5.9 million from warrant exercises during the quarter [18] - As of October, the cash and investments balance was approximately $125.7 million, providing a cash runway into 2026 [19] Business Line Data and Key Metrics Changes - The CANAL trial for chronic cough and idiopathic pulmonary fibrosis (IPF) reported positive results, confirming significant reductions in cough frequency and severity [6][10] - The company is preparing for the next phase of development for Haduvio, focusing on chronic cough and IPF, with plans to initiate a new study in the first half of 2023 [9][14] - The Phase IIb/III PRISM trial for prurigo nodularis (PN) achieved statistical significance on all key endpoints, with ongoing work to prepare for an end of Phase II meeting with the FDA [11][12] Market Data and Key Metrics Changes - The company is expanding its clinical trial sites beyond the UK to include the US and Germany, which is expected to enhance enrollment capabilities for future studies [27] - The positive trial data for IPF cough has garnered attention from key opinion leaders (KOLs) and pulmonologists globally, indicating strong market interest [10][40] Company Strategy and Development Direction - The company is focused on advancing Haduvio for chronic cough and IPF, while also exploring additional chronic cough indications, with a Phase II refractory chronic cough study planned for mid-2023 [29][30] - Discussions are ongoing with potential partners for the PN program, with a preference to find a partner rather than conducting the final study independently [31][41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the execution of business plans and the positive trial results, positioning the company well for continued development [14] - The company is actively preparing for regulatory meetings and designing protocols for the next phase of development, indicating a proactive approach to future challenges [13] Other Important Information - The company is preparing a manuscript to publish trial results and has presented data at various medical meetings, enhancing visibility in the medical community [10][12] Q&A Session Summary Question: What are the plans for the future IPF trial design and enrollment? - Management is in discussions with regulatory agencies and plans to use an objective cough monitor as an endpoint, with a focus on validating it in the IPF population [24][25] - Enrollment is expected to improve with more sites available in the US and Germany, mitigating previous challenges faced during the UK-only study [27] Question: Is there interest in exploring additional chronic cough indications? - The company is interested in initiating a Phase II refractory chronic cough study by mid-2023, while prioritizing the IPF cough program [29][30] Question: What is the status of the PN program and potential partnerships? - The company is actively seeking partners for the PN program and does not plan to run the final study independently, focusing resources on the cough portfolio [31][41]

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q%20Filing%20Information) [Registrant and Filing Details](index=1&type=section&id=Registrant%20and%20Filing%20Details) This section provides the basic filing information for Trevi Therapeutics, Inc.'s Form 10-Q for the quarterly period ended September 30, 2022, including its incorporation state, principal executive offices, and stock exchange listing Registrant Information | Detail | Value | | :----- | :---- | | Registrant Name | TREVI THERAPEUTICS, INC. | | State of Incorporation | Delaware | | Principal Executive Offices | 195 Church Street, 14th Floor, New Haven, Connecticut 06510 | | Telephone Number | (203) 304-2499 | | Commission File Number | 001-38886 | | Trading Symbol | TRVI | | Exchange Registered | The Nasdaq Stock Market LLC | - The registrant has filed all required reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding **12 months** and has been subject to such filing requirements for the past **90 days**, also submitting electronically every Interactive Data File required by Rule 405 of Regulation S-T[3](index=3&type=chunk) Filer Status and Common Stock Outstanding | Category | Status | | :------- | :----- | | Large accelerated filer | ☐ | | Accelerated filer | ☐ | | Non-accelerated filer | ☒ | | Smaller reporting company | ☒ | | Emerging growth company | ☒ | | Shell company | No ☒ | | Common Stock Outstanding (as of Nov 10, 2022) | 59,922,945 shares | [Cautionary Note Regarding Forward-Looking Statements and Industry Data](index=2&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements%20and%20Industry%20Data) This section provides a cautionary note regarding forward-looking statements and industry data included in the Form 10-Q, emphasizing that actual results may differ materially from expectations due to substantial risks and uncertainties, particularly those detailed in the 'Risk Factors' section - The report contains forward-looking statements about strategy, future operations, financial position, revenues, costs, prospects, plans, and management objectives, identified by words like 'anticipate,' 'believe,' 'expect,' and 'plan'[5](index=5&type=chunk) - Key forward-looking statements include plans for Haduvio's clinical trials (IPF, refractory chronic cough, prurigo nodularis), timing of data reporting and regulatory approvals, funding expectations, and the impact of the COVID-19 pandemic[10](index=10&type=chunk) - Readers are cautioned not to place undue reliance on forward-looking statements, as actual results could differ materially due to factors discussed in the 'Risk Factors' section, and the company does not assume any obligation to update these statements[6](index=6&type=chunk)[7](index=7&type=chunk) - Industry and market data are based on third-party publications and internal estimates, which involve assumptions and limitations, and readers are cautioned against undue reliance on such data[8](index=8&type=chunk) [RISK FACTOR SUMMARY](index=3&type=section&id=RISK%20FACTOR%20SUMMARY) [Summary of Principal Risks](index=3&type=section&id=Summary%20of%20Principal%20Risks) This section provides a high-level summary of the key risks that could materially and adversely affect the company's business, financial condition, results of operations, and future growth prospects, including significant losses, funding needs, dependence on Haduvio, clinical trial challenges, and competitive pressures - The company has incurred **significant losses** since inception and expects to continue incurring losses, with no assurance of achieving or maintaining profitability[12](index=12&type=chunk) - **Substantial additional funding** is required; inability to raise capital could force delays or abandonment of product development or commercialization efforts[12](index=12&type=chunk) - The business is highly dependent on the successful development and commercialization of **Haduvio**, its sole product candidate; delays or failures would substantially harm the business[12](index=12&type=chunk) - Clinical trials for Haduvio (chronic cough in IPF, refractory chronic cough, prurigo nodularis) face risks of design changes, regulatory delays, enrollment difficulties, and unpredictable outcomes regarding safety and efficacy[12](index=12&type=chunk) - Haduvio's mechanism of action (κ-opioid receptor agonist and μ-opioid receptor antagonist) may lead to side effects like psychiatric issues, withdrawal, respiratory depression, and cardiac risk, potentially resulting in restrictive labeling or controlled substance classification[12](index=12&type=chunk)[13](index=13&type=chunk) - The company faces substantial competition and relies on third parties for clinical trials and manufacturing, posing risks if these parties do not perform satisfactorily[13](index=13&type=chunk) - Failure to establish sales, marketing, and distribution capabilities or maintain intellectual property rights could hinder commercialization and business success[13](index=13&type=chunk) [Table of Contents](index=5&type=section&id=Table%20of%20Contents) This section presents the table of contents for the Quarterly Report on Form 10-Q, outlining the document's structure into Part I (Financial Information) and Part II (Other Information), with specific items and their corresponding page numbers [PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Trevi Therapeutics, Inc., including the balance sheets, statements of comprehensive loss, statements of stockholders' equity, and statements of cash flows, providing a snapshot of the company's financial position and performance [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a significant increase in total assets and stockholders' equity from December 31, 2021, to September 30, 2022, primarily driven by increases in cash, cash equivalents, and marketable securities Condensed Consolidated Balance Sheet Highlights (Amounts in thousands) | Metric | September 30, 2022 (Unaudited) | December 31, 2021 | | :-------------------------------- | :------------------------------- | :------------------ | | Cash and cash equivalents | $66,574 | $36,830 | | Marketable securities | $59,029 | — | | Total current assets | $127,318 | $37,957 | | Total assets | $128,361 | $38,475 | | Total current liabilities | $14,641 | $12,724 | | Total liabilities | $18,458 | $21,400 | | Total stockholders' equity | $109,903 | $17,075 | | Accumulated deficit | $(204,564) | $(180,917) | [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) The statements of comprehensive loss indicate continued net losses for both the three and nine months ended September 30, 2022 and 2021, with research and development expenses being the largest operating cost Condensed Consolidated Statements of Comprehensive Loss Highlights (Amounts in thousands) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Research and development | $5,769 | $4,718 | $15,517 | $16,805 | | General and administrative | $2,636 | $2,229 | $7,733 | $7,398 | | Total operating expenses | $8,405 | $6,947 | $23,250 | $24,203 | | Loss from operations | $(8,405) | $(6,947) | $(23,250) | $(24,203) | | Net loss | $(8,266) | $(7,255) | $(23,647) | $(25,420) | | Basic and diluted net loss per common share | $(0.12) | $(0.34) | $(0.44) | $(1.25) | - **Net loss** for the three months ended September 30, 2022, increased to **$8.3 million** from **$7.3 million** in the prior year, while for the nine months, it decreased to **$23.6 million** from **$25.4 million**[19](index=19&type=chunk) - **Interest income, net**, significantly increased to **$424 thousand** for the three months and **$623 thousand** for the nine months ended September 30, 2022, compared to minimal amounts in 2021, due to higher cash and marketable securities balances and interest rate yields[19](index=19&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity saw a substantial increase from December 31, 2021, to September 30, 2022, primarily due to significant issuances of common stock and warrants from public and private offerings, and warrant exercises Condensed Consolidated Statements of Stockholders' Equity Highlights (Amounts in thousands, except share amounts) | Metric | Balance at Dec 31, 2021 | Balance at Sep 30, 2022 | | :------------------------------------------ | :---------------------- | :---------------------- | | Common Stock (Shares) | 28,505,804 | 58,322,517 | | Common Stock (Amount) | $29 | $58 | | Additional Paid-in Capital | $197,963 | $314,672 | | Accumulated Deficit | $(180,917) | $(204,564) | | Total Stockholders' Equity | $17,075 | $109,903 | - Key activities contributing to the change in equity during the nine months ended September 30, 2022, include: issuance of common stock and warrants under public offering and private placement (**$103,010 thousand**), proceeds from warrant exercises (**$11,782 thousand**), and stock-based compensation (**$1,826 thousand**)[23](index=23&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company experienced a net increase in cash and cash equivalents for the nine months ended September 30, 2022, primarily driven by significant cash provided by financing activities, offsetting cash used in operating and investing activities Condensed Consolidated Statements of Cash Flows Highlights (Amounts in thousands) | Activity | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(21,844) | $(22,717) | | Net cash used in investing activities | $(59,067) | — | | Net cash provided by financing activities | $110,655 | $7,034 | | Net increase (decrease) in cash and cash equivalents | $29,744 | $(15,683) | | Cash and cash equivalents at end of period | $66,574 | $29,318 | - Financing activities provided **$110.7 million** in cash for the nine months ended September 30, 2022, largely from public and private offerings and warrant exercises, a substantial increase from **$7.0 million** in the prior year[26](index=26&type=chunk) - Investing activities used **$59.1 million** in cash during the nine months ended September 30, 2022, primarily due to purchases of available-for-sale marketable securities, compared to no investing activity in the prior year[26](index=26&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes to the unaudited condensed consolidated financial statements, explaining the company's business, significant accounting policies, and specific financial line items such as marketable securities, debt, stockholders' equity, and commitments [Note 1. Nature of the Business](index=11&type=section&id=Note%201.%20Nature%20of%20the%20Business) Trevi Therapeutics, Inc. is a clinical-stage biopharmaceutical company focused on developing Haduvio (oral nalbuphine ER) for chronic cough in adults with idiopathic pulmonary fibrosis (IPF), other chronic cough indications, and prurigo nodularis, leveraging its opioid receptor modulation mechanism - Trevi Therapeutics is a clinical-stage biopharmaceutical company developing **Haduvio** (oral nalbuphine ER) for chronic cough in adults with IPF, other chronic cough indications, and prurigo nodularis[29](index=29&type=chunk) - Haduvio's active ingredient, nalbuphine, is a mixed κ-opioid receptor agonist and μ-opioid receptor antagonist, approved as an injectable for pain for over **20 years** in the U.S. and Europe, and is not scheduled as a controlled substance in most regions[30](index=30&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=11&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the significant accounting policies used in preparing the unaudited interim condensed consolidated financial statements, including the basis of presentation, use of estimates, and specific policies for cash equivalents, marketable securities, fair value measurements, R&D expenses, and stock-based compensation - The financial statements are prepared in accordance with **GAAP** for interim financial information and **SEC rules**, with certain information condensed or omitted[31](index=31&type=chunk) - Significant estimates include R&D expenses, valuation of stock-based awards, and valuation allowance of deferred tax assets, where actual results may differ from these estimates[34](index=34&type=chunk) - Marketable securities are classified as **available-for-sale** and reported at fair value, with unrealized gains and losses included in stockholders' equity[38](index=38&type=chunk) - Research and development expenses, including personnel, consulting, and contract manufacturing costs, are expensed as incurred and are not allocated by specific Haduvio indications due to broad support activities[49](index=49&type=chunk) - Stock-based compensation is recognized using a **fair-value based method** (Black-Scholes model) over the requisite service period, with performance-based vesting recognized when conditions are probable[55](index=55&type=chunk)[60](index=60&type=chunk) [Note 3. Marketable Securities](index=15&type=section&id=Note%203.%20Marketable%20Securities) As of September 30, 2022, the company held **$59.0 million** in available-for-sale marketable securities, primarily U.S. treasury securities, corporate bonds, and commercial paper, all maturing within one year, with net unrealized losses of **$263 thousand** Marketable Securities (Amounts in thousands) as of September 30, 2022 | Type of security | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | | :----------------- | :------------- | :--------------------- | :---------------------- | :------------------- | | U.S. treasury securities | $21,830 | $— | $(92) | $21,738 | | Corporate bonds | $15,425 | $— | $(171) | $15,254 | | Commercial paper | $22,037 | $— | $— | $22,037 | | Total marketable securities | $59,292 | $— | $(263) | $59,029 | - All marketable securities held as of September 30, 2022, are due to mature in **less than one year**[71](index=71&type=chunk) - No realized gains or losses on available-for-sale marketable securities were recorded during the three and nine months ended September 30, 2022, and no other-than-temporary impairment losses were recognized[72](index=72&type=chunk) [Note 4. Fair Value Measurements](index=15&type=section&id=Note%204.%20Fair%20Value%20Measurements) The company's financial assets and liabilities are measured at fair value using a three-level hierarchy, with most assets classified as Level 1 (money market funds, U.S. treasury securities) or Level 2 (corporate bonds, commercial paper), and the term loan derivative liability, previously Level 3, was settled Fair Value Measurement Summary (Amounts in thousands) as of September 30, 2022 | Balance Sheet Classification | Type of Instrument | Level 1 | Level 2 | Level 3 | Total | | :--------------------------- | :----------------- | :------ | :------ | :------ | :------ | | Financial assets: | | | | | | | Cash equivalents | Money market funds | $65,574 | $— | $— | $65,574 | | Marketable securities | U.S. treasury securities | $21,738 | $— | $— | $21,738 | | Marketable securities | Corporate bonds | $— | $15,254 | $— | $15,254 | | Marketable securities | Commercial paper | $— | $22,037 | $— | $22,037 | | Total assets | | $87,312 | $37,291 | $— | $124,603 | - The term loan derivative liability, previously a **Level 3 liability**, was settled and reclassed to current and non-current interest payable as of September 30, 2022[74](index=74&type=chunk)[90](index=90&type=chunk) [Note 5. Leases](index=16&type=section&id=Note%205.%20Leases) The company holds an operating lease for office space in New Haven, CT, expiring in February 2023, and an immaterial office equipment lease, with lease expenses consistent year-over-year and the remaining lease term for the office space less than one year - The primary operating lease is for office space in New Haven, CT, with a **60-month term**, expiring **February 1, 2023**[75](index=75&type=chunk) Operating Lease Liabilities (Amounts in thousands) | Metric | September 30, 2022 | December 31, 2021 | | :-------------------------------- | :------------------- | :------------------ | | Operating lease right-of-use asset | $53 | $131 | | Operating lease liabilities, current portion | $59 | $120 | | Operating lease liabilities, long term portion | $2 | $24 | | Total operating lease liabilities | $61 | $144 | Future Minimum Lease Payments (Amounts in thousands) | Year | Amount | | :--- | :----- | | 2022 | $36 | | 2023 | $25 | | 2024 | $2 | | 2025 | $1 | | Total lease payments | $64 | | Less: imputed discount rate | $(3) | | Carrying value of operating lease liabilities | $61 | [Note 6. Accrued Expenses](index=17&type=section&id=Note%206.%20Accrued%20Expenses) Accrued expenses increased to **$5.2 million** as of September 30, 2022, from **$3.8 million** at December 31, 2021, primarily due to higher accruals for R&D projects and consulting/professional fees Accrued Expenses (Amounts in thousands) | Category | September 30, 2022 | December 31, 2021 | | :-------------------------------- | :------------------- | :------------------ | | Accrued R&D projects | $3,018 | $2,303 | | Accrued compensation and benefits | $1,069 | $1,250 | | Accrued consulting and professional fees | $747 | $176 | | Accrued other | $415 | $79 | | Total accrued expenses | $5,249 | $3,808 | [Note 7. Debt](index=17&type=section&id=Note%207.%20Debt) The company's SVB Term Loan, initially **$14.0 million**, had an outstanding balance of **$9.9 million** as of September 30, 2022, with amendments modifying cash collateralization conditions and interest rates, and cash collateralization requirements no longer in effect after positive Phase 2b/3 PRISM trial data - The SVB Term Loan, with an original principal of **$14.0 million**, bears a floating interest rate (greater of prime + **3.00%** or **6.25%** after the 2022 Equity Event)[81](index=81&type=chunk)[84](index=84&type=chunk) - Monthly principal and interest payments began **March 1, 2022**, with full repayment due **February 1, 2024**, and a final payment fee of **$1.2 million**[81](index=81&type=chunk)[88](index=88&type=chunk) - Amendments to the SVB Loan Agreement terminated cash collateralization obligations upon the **2022 Equity Event** (April 2022 Private Placement) and confirmation of positive Phase 2b/3 PRISM trial data[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk) SVB Term Loan Payable (Amounts in thousands) | Metric | September 30, 2022 | December 31, 2021 | | :-------------------------------- | :------------------- | :------------------ | | Principal outstanding under term loan | $9,917 | $14,000 | | Term loan discount-interest | $(35) | $(84) | | Term loan discount-unamortized deferred charges | $(43) | $(76) | | Term loan discount-financing costs, net of accretion | $(5) | $(12) | | Term loan-final payment fee | $966 | $657 | | Total term loan payable | $10,800 | $14,485 | | Less current portion | $7,000 | $5,833 | | Term loan payable, non-current | $3,800 | $8,652 | Interest Expense on SVB Term Loan (Amounts in thousands) | Category | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Interest payments | $170 | $152 | $470 | $451 | | Accrual of the final payment fee | $89 | $118 | $309 | $355 | | Accretion and amortization of term loan discounts | $33 | $33 | $110 | $87 | | Total Interest Expense | $292 | $303 | $889 | $893 | [Note 8. Stockholders' Equity](index=19&type=section&id=Note%208.%20Stockholders%27%20Equity) The company significantly increased its common stock and additional paid-in capital through various equity financings, including private placements, a public offering, and warrant exercises, resulting in a substantial increase in shares reserved for future issuance Shares of Common Stock Reserved for Future Issuance | Category | September 30, 2022 | December 31, 2021 | | :------------------------------------------ | :------------------- | :------------------ | | 2012 Stock Incentive Plan | 607,494 | 665,720 | | 2019 Stock Incentive Plan | 4,547,939 | 3,400,489 | | 2019 Employee Stock Purchase Plan | 721,717 | 470,631 | | Common stock warrants and pre-funded warrants | 48,330,707 | 20,602,244 | | LPC Purchase Agreement | 30,000,000 | 30,000,000 | | Total Reserved Shares | 84,207,857 | 55,139,084 | - The ATM Sales Agreement was amended in **May 2022** to increase the maximum aggregate offering price of common stock from **$12.0 million** to **$62.0 million**, with no sales made under this agreement during the three and nine months ended September 30, 2022[97](index=97&type=chunk)[98](index=98&type=chunk) - Private placements in **October 2021** and **April 2022**, along with a public offering in **September 2022**, generated significant gross proceeds (approx. **$14.8 million**, **$55.0 million**, and **$58.1 million** respectively) through the issuance of common stock and pre-funded warrants[100](index=100&type=chunk)[101](index=101&type=chunk)[103](index=103&type=chunk)[105](index=105&type=chunk) Warrant Activity (Nine Months Ended September 30, 2022) | Category | Number of Pre-funded Warrant Shares | Number of Common Stock Warrant Shares | Total Number of Warrant Shares | Weighted Average Exercise Price | | :-------------------------------- | :---------------------------------- | :------------------------------------ | :----------------------------- | :------------------------------ | | Outstanding as of Dec 31, 2021 | 2,300,000 | 18,302,244 | 20,602,244 | $1.22 | | Issued | 38,627,003 | — | 38,627,003 | $0.001 | | Exercised | (2,300,000) | (8,598,540) | (10,898,540) | $1.37 | | Outstanding as of Sep 30, 2022 | 38,627,003 | 9,703,704 | 48,330,707 | $0.28 | Stock-Based Compensation Expenses (Amounts in thousands) | Expense Category | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | General and administrative | $371 | $371 | $1,195 | $1,410 | | Research and development | $198 | $169 | $631 | $593 | | Total | $569 | $540 | $1,826 | $2,003 | [Note 9. Income Taxes](index=22&type=section&id=Note%209.%20Income%20Taxes) The company maintains a full valuation allowance on deferred tax assets and recorded a minimal income tax benefit for both the three and nine months ended September 30, 2022 and 2021, primarily to align estimates for state R&D tax credits - A **full valuation allowance** is maintained on deferred tax assets as of September 30, 2022, and December 31, 2021[116](index=116&type=chunk) - Income tax benefit (expense) was **$7 thousand** for the three months ended September 30, 2022 (vs. **$(2) thousand** in 2021) and **$16 thousand** for the nine months ended September 30, 2022 (vs. **$15 thousand** in 2021), primarily for state R&D tax credits[19](index=19&type=chunk)[116](index=116&type=chunk) [Note 10. Net Loss per Share](index=22&type=section&id=Note%2010.%20Net%20Loss%20per%20Share) Basic and diluted net loss per common share were **$(0.12)** and **$(0.44)** for the three and nine months ended September 30, 2022, respectively, with potential dilutive securities excluded from diluted EPS calculations due to their anti-dilutive effect in periods of net loss Net Loss per Share Attributable to Common Stockholders | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net loss | $(8,266) | $(7,255) | $(23,647) | $(25,420) | | Weighted average common shares (basic and diluted) | 68,898,810 | 21,607,979 | 53,221,949 | 20,390,852 | | Basic and diluted net loss per common share | $(0.12) | $(0.34) | $(0.44) | $(1.25) | - Pre-funded warrants (**38,627,003 shares** outstanding as of Sep 30, 2022) are included in the weighted average common shares for basic and diluted net loss per share calculations[118](index=118&type=chunk) Potential Common Shares Excluded from Diluted EPS (Anti-Dilutive) | Security Type | Shares as of Sep 30, 2022 | Shares as of Sep 30, 2021 | | :------------ | :------------------------ | :------------------------ | | Stock Options | 4,141,907 | 3,049,180 | | Warrants | 9,703,704 | — | | Total | 13,845,611 | 3,049,180 | [Note 11. Collaborative and Licensing Agreements](index=23&type=section&id=Note%2011.%20Collaborative%20and%20Licensing%20Agreements) The company holds an exclusive worldwide license from Endo Pharmaceuticals Inc. for nalbuphine hydrochloride products, including Haduvio, which involves potential milestone payments and mid-single-digit royalties on net sales, and outlines termination rights for both parties - The company has an **exclusive worldwide license** from Endo Pharmaceuticals Inc. for patent rights and know-how to develop and commercialize nalbuphine hydrochloride products, including Haduvio[121](index=121&type=chunk) - Obligations include potential milestone payments of **$0.3 million** upon Phase 3 completion and **$0.8 million** upon U.S. marketing approval, plus **mid-single-digit royalties** on net sales and a **low-to-mid double-digit percentage** of sublicense income[122](index=122&type=chunk) - The royalty term extends until the later of patent expiration or **10 years** post-first commercial sale, followed by a low single-digit know-how and trademark royalty[123](index=123&type=chunk) - Both parties have termination rights for material breach, and the company can terminate for convenience with **180 days' notice**[125](index=125&type=chunk) [Note 12. Commitments and Contingencies](index=24&type=section&id=Note%2012.%20Commitments%20and%20Contingencies) The company's commitments primarily stem from outsourced development activities with third parties, including CROs and contract manufacturers, which may involve termination costs, as well as existing lease and licensing agreements - Significant development activities are outsourced to third parties (CROs, contract manufacturers), which may require termination costs for reimbursement of incurred expenses[128](index=128&type=chunk) - Additional commitments exist under lease agreements (Note 5) and licensing agreements (Note 11)[129](index=129&type=chunk) [Note 13. Subsequent Event](index=24&type=section&id=Note%2013.%20Subsequent%20Event) Subsequent to the reporting period, on **October 25, 2022**, the company sold an additional **1,600,428 shares** of common stock for approximately **$3.1 million** gross proceeds, as part of the underwriters' partial exercise of their option in the September 2022 Offering - On **October 25, 2022**, the company sold **1,600,428 shares** of common stock at **$1.93 per share** to underwriters, generating approximately **$3.1 million** in gross proceeds, through the partial exercise of an option from the September 2022 Offering[130](index=130&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting key business developments, financial performance, liquidity, and future funding requirements, with a focus on Haduvio's clinical progress and the impact of external factors like COVID-19 [Overview](index=24&type=section&id=Overview) Trevi Therapeutics is a clinical-stage biopharmaceutical company focused on Haduvio for chronic cough (IPF, refractory) and prurigo nodularis, reporting positive Phase 2 CANAL and Phase 2b/3 PRISM trial data, but continues to incur significant losses and requires substantial additional funding for ongoing and future clinical development - Trevi Therapeutics is focused on developing **Haduvio** (oral nalbuphine ER) for chronic cough in adults with IPF and other chronic cough indications, and for prurigo nodularis[134](index=134&type=chunk) - Positive data from the **Phase 2 CANAL trial** for chronic cough in IPF showed a **75.1% reduction** in daytime cough frequency (p<0.0001) and significant improvements in patient-reported outcomes[135](index=135&type=chunk)[141](index=141&type=chunk) - Positive results from the **Phase 2b/3 PRISM trial** for prurigo nodularis demonstrated a **25% response rate** for a 4-point reduction in Worst Itch Numerical Rating Scale (p=0.0157) and significant improvements in ItchyQoL and PROMIS sleep disturbance[138](index=138&type=chunk)[142](index=142&type=chunk) - The company has incurred an **accumulated deficit of $204.6 million** as of September 30, 2022, and expects to incur substantial expenditures for Haduvio's clinical development, regulatory approval, and commercial launch[143](index=143&type=chunk)[152](index=152&type=chunk) - Existing cash, cash equivalents, and marketable securities of **$125.6 million** as of September 30, 2022, are expected to fund operations for at least **12 months**, but substantial additional funding is required for the growth strategy[151](index=151&type=chunk)[153](index=153&type=chunk) [Impacts of the COVID-19 Pandemic](index=27&type=section&id=Impacts%20of%20the%20COVID-19%20Pandemic) The COVID-19 pandemic has caused significant disruptions, including delays in clinical trial activities (Phase 2 CANAL, Phase 2b/3 PRISM), operational interruptions, and potential supply chain issues, which may continue to adversely affect the company's business and financial condition - The **COVID-19 pandemic** has caused restrictions and delays at clinical sites for both **Phase 2b/3 PRISM** and **Phase 2 CANAL** trials[155](index=155&type=chunk) - Potential adverse impacts include difficulties in recruiting/retaining investigators and staff, redirection of hospital resources, travel restrictions, and delays in regulatory approvals[155](index=155&type=chunk) - Operations of third-party suppliers and contract research organizations could also be negatively affected, leading to delays or disruptions in drug product supply for clinical trials[156](index=156&type=chunk) [Components of Operating Results](index=27&type=section&id=Components%20of%20Operating%20Results) This section details the components of the company's operating results, primarily focusing on research and development (R&D) and general and administrative (G&A) expenses, and other income/expense items like term loan derivative liability and interest income/expense - All **R&D expenses** are incurred for Haduvio's development, including personnel, consulting, and contract manufacturing costs, and are expensed as incurred without allocation by specific indications[157](index=157&type=chunk) - R&D expenses are expected to increase as Haduvio advances through clinical development, regulatory approval, and potential commercial launch[158](index=158&type=chunk) - **General and administrative expenses**, comprising personnel costs, professional fees, and operating expenses, are also anticipated to rise due to increased personnel and expanded infrastructure[159](index=159&type=chunk)[160](index=160&type=chunk) - Other income (expense), net, includes changes in the fair value of the term loan derivative liability (now settled), interest income from cash/marketable securities, and interest expense from the SVB Term Loan[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) The company's results of operations show an increased net loss for the three months ended September 30, 2022, primarily due to higher R&D and G&A expenses, but a decreased net loss for the nine-month period, driven by reduced clinical trial activity and increased interest income Comparison of Three Months Ended September 30, 2022 and 2021 (Amounts in thousands) | Metric | 2022 | 2021 | Change | | :------------------------------------------ | :----- | :----- | :----- | | Research and development | $5,769 | $4,718 | $1,051 | | General and administrative | $2,636 | $2,229 | $407 | | Total operating expenses | $8,405 | $6,947 | $1,458 | | Net loss | $(8,266) | $(7,255) | $(1,011) | | Other income (expense), net | $132 | $(306) | $438 | - **R&D expenses** increased by **$1.1 million** for the three months ended September 30, 2022, due to startup activities for planned trials and increased Phase 2 CANAL trial activity, partially offset by decreased Phase 2b/3 PRISM trial activity[168](index=168&type=chunk) - **G&A expenses** increased by **$0.4 million** for the three months ended September 30, 2022, mainly due to higher legal fees for intellectual property filings and increased market research costs[169](index=169&type=chunk) Comparison of Nine Months Ended September 30, 2022 and 2021 (Amounts in thousands) | Metric | 2022 | 2021 | Change | | :------------------------------------------ | :----- | :----- | :----- | | Research and development | $15,517 | $16,805 | $(1,288) | | General and administrative | $7,733 | $7,398 | $335 | | Total operating expenses | $23,250 | $24,203 | $(953) | | Net loss | $(23,647) | $(25,420) | $1,773 | | Other expense, net | $(413) | $(1,232) | $819 | - **R&D expenses** decreased by **$1.3 million** for the nine months ended September 30, 2022, primarily due to decreased clinical trial recruitment and activity in the Phase 2b/3 PRISM trial, reduced consulting, and lower personnel-related expenses, partially offset by increased startup activities for planned trials[173](index=173&type=chunk) - **Other expense, net**, decreased by **$0.8 million** for the nine months ended September 30, 2022, driven by a **$0.6 million** increase in interest income and the non-recurrence of a **$0.4 million** expense related to the Lincoln Park Capital Fund agreement, partially offset by a **$0.2 million** expense from the term loan derivative liability[175](index=175&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) The company has historically financed operations through equity and debt, with significant proceeds from recent private and public offerings, and as of September 30, 2022, cash, cash equivalents, and marketable securities totaled **$125.6 million**, expected to fund operations into 2026, but substantial additional funding is required for future development and commercialization - Since inception, the company has financed operations through private placements, IPO, ATM sales, and term loans, incurring significant operating losses and negative cash flows[176](index=176&type=chunk)[177](index=177&type=chunk) - Recent financing activities include two private placements in **October 2021** (gross proceeds ~**$14.8 million**), an **April 2022** private placement (gross proceeds ~**$55.0 million**), and a **September 2022** public offering (aggregate gross proceeds ~**$58.1 million**)[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk) Cash Flow Summary (Nine Months Ended September 30, Amounts in thousands) | Activity | 2022 | 2021 | Change | | :-------------------------------- | :------- | :------- | :------- | | Net cash used in operating activities | $(21,844) | $(22,717) | $873 | | Net cash used in investing activities | $(59,067) | $— | $(59,067) | | Net cash provided by financing activities | $110,655 | $7,034 | $103,621 | | Net increase (decrease) in cash and cash equivalents | $29,744 | $(15,683) | $45,427 | - As of September 30, 2022, cash, cash equivalents, and marketable securities totaled **$125.6 million**, projected to fund operating expenses and capital expenditure requirements into **2026**, subject to FDA agreement on Haduvio's chronic cough trials[151](index=151&type=chunk)[198](index=198&type=chunk) - Substantial additional funding will be required for future operations, including Haduvio's clinical development (IPF, refractory chronic cough, HAL study, PRISM open-label extension), regulatory approvals, and potential commercial launch activities[195](index=195&type=chunk)[197](index=197&type=chunk) [Critical Accounting Policies and Use of Estimates](index=35&type=section&id=Critical%20Accounting%20Policies%20and%20Use%20of%20Estimates) The company's financial statements rely on estimates and assumptions affecting reported asset and liability amounts and expenses, with no material changes to critical accounting policies occurring during the nine months ended September 30, 2022 - Preparation of financial statements requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, and expenses[203](index=203&type=chunk) - No material changes to critical accounting policies were made during the nine months ended September 30, 2022[204](index=204&type=chunk) [Recently Adopted Accounting Pronouncements](index=35&type=section&id=Recently%20Adopted%20Accounting%20Pronouncements) There were no new accounting pronouncements adopted during the nine months ended September 30, 2022, that are expected to materially impact the company's condensed consolidated financial statements - No new accounting pronouncements were adopted during the nine months ended September 30, 2022, that are expected to materially impact the financial statements[205](index=205&type=chunk) [Recently Issued Accounting Pronouncements](index=35&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) There were no new accounting pronouncements issued during the nine months ended September 30, 2022, that are expected to materially impact the company's condensed consolidated financial statements - No new accounting pronouncements were issued during the nine months ended September 30, 2022, that are expected to materially impact the financial statements[206](index=206&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there are no quantitative and qualitative disclosures about market risk applicable to the company for the reporting period [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=36&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) As of September 30, 2022, the company's management, including the CEO and CFO, concluded that its disclosure controls and procedures were effective at a reasonable assurance level, designed to ensure timely and accurate reporting - Management, with CEO and CFO participation, evaluated the effectiveness of disclosure controls and procedures as of **September 30, 2022**[209](index=209&type=chunk) - Disclosure controls and procedures were concluded to be effective at the **reasonable assurance level**, ensuring timely and accurate communication of required information[209](index=209&type=chunk) [Changes in Internal Control over Financial Reporting](index=36&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No changes in internal control over financial reporting occurred during the three months ended September 30, 2022, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting - No material changes in internal control over financial reporting occurred during the three months ended **September 30, 2022**[210](index=210&type=chunk) [PART II. OTHER INFORMATION](index=36&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings - The company is not subject to any **material legal proceedings**[212](index=212&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) This comprehensive section details numerous risks that could materially affect the company's business, financial condition, and operating results, covering financial position, product development, dependence on third parties, intellectual property, regulatory approvals, employee matters, common stock volatility, and broader business operations [Risks Related to Our Financial Position and Need for Additional Capital](index=36&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Need%20for%20Additional%20Capital) The company has a history of significant losses and an accumulated deficit, requiring substantial additional funding to continue operations and Haduvio's development, where inability to raise capital or increased debt obligations could severely impact its financial condition and growth strategy - The company has incurred **significant net losses** since inception, with an **accumulated deficit of $204.6 million** as of September 30, 2022, and expects increasing losses for the foreseeable future[214](index=214&type=chunk) - **Substantial additional funding** is required to advance Haduvio through clinical development, regulatory approval, and commercial launch; failure to raise capital could force delays or abandonment of programs[220](index=220&type=chunk)[221](index=221&type=chunk) - Existing cash, cash equivalents, and marketable securities are projected to fund operations into **2026**, but this estimate is based on assumptions that may prove wrong, necessitating earlier additional financing[222](index=222&type=chunk)[223](index=223&type=chunk) - Indebtedness under the **SVB Term Loan**, with a floating interest rate, could adversely affect financial condition, restrict future operations, and potentially lead to acceleration of obligations if covenants are breached[225](index=225&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk) - Raising additional capital through equity could dilute stockholders, while debt financing could impose restrictive covenants and fixed payment obligations[229](index=229&type=chunk)[230](index=230&type=chunk) [Risks Related to the Development and Commercialization of Haduvio and Any Future Product Candidates](index=41&type=section&id=Risks%20Related%20to%20the%20Development%20and%20Commercialization%20of%20Haduvio%20and%20Any%20Future%20Product%20Candidates) The company's success hinges on Haduvio's development and commercialization, which faces significant risks including an unproven approach for new indications, lengthy and uncertain clinical trials, potential for trial failures, difficulties in patient enrollment, adverse events, and challenges in achieving market acceptance against competitors - The company is solely dependent on **Haduvio**; failure in its development or commercialization for chronic cough or prurigo nodularis would substantially harm the business[233](index=233&type=chunk)[234](index=234&type=chunk) - Haduvio's approach for neurologically mediated conditions is unproven, and its active ingredient, nalbuphine, has not been approved for indications other than pain[237](index=237&type=chunk) - Clinical drug development is lengthy, expensive, and uncertain, with risks including unfavorable or inconclusive results, need for additional trials, slow subject enrollment, and potential for regulatory restructuring or abandonment of programs[239](index=239&type=chunk)[240](index=240&type=chunk) - Adverse events or undesirable side effects, such as psychiatric effects, withdrawal, respiratory depression, or cardiac risk associated with Haduvio's opioid mechanism, could delay or prevent marketing approval or limit its use[257](index=257&type=chunk)[259](index=259&type=chunk) - Haduvio, if approved, may face restrictive marketing and distribution regulations, including potential **REMS programs** or classification as a controlled substance, which could harm profitability[262](index=262&type=chunk)[265](index=265&type=chunk) - Market acceptance by physicians, patients, and third-party payors is uncertain, influenced by efficacy, safety, pricing, competition (e.g., **Dupixent** for prurigo nodularis), and reluctance to switch from existing or off-label therapies[275](index=275&type=chunk)[276](index=276&type=chunk)[287](index=287&type=chunk) [Risks Related to Our Dependence on Third Parties](index=52&type=section&id=Risks%20Related%20to%20Our%20Dependence%20on%20Third%20Parties) The company heavily relies on third parties for clinical trials, manufacturing, storage, packaging, and distribution of Haduvio, where failures in performance, supply chain disruptions, or inability to establish collaborations on favorable terms could significantly harm business operations and development timelines - Reliance on third-party CROs, clinical data management organizations, and investigators for clinical trials limits control and poses risks of non-compliance with protocols or regulatory requirements (**cGCPs**), leading to delays or data unreliability[299](index=299&type=chunk)[300](index=300&type=chunk)[301](index=301&type=chunk) - The company depends on contract manufacturers for drug substance and product, including a **single supplier (Mallinckrodt)** for nalbuphine hydrochloride, posing risks of manufacturing delays, supply interruptions, and compliance failures[302](index=302&type=chunk)[304](index=304&type=chunk)[306](index=306&type=chunk) - **Mallinckrodt's** recent emergence from bankruptcy creates uncertainty regarding its ability to continue supplying nalbuphine hydrochloride drug substance, potentially causing significant delays and cost increases[304](index=304&type=chunk) - Inability to establish collaborations for Haduvio's development or commercialization on commercially reasonable terms could force the company to curtail or delay programs or undertake costly activities independently[309](index=309&type=chunk)[310](index=310&type=chunk) - Collaborations, if established, carry risks such as collaborators not dedicating sufficient resources, failing to perform obligations, or pursuing competing products, which could delay or terminate development[313](index=313&type=chunk) [Risks Related to Our Intellectual Property](index=55&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) The company's intellectual property, including licensed patents for Haduvio, is crucial for its success, but faces risks including non-compliance with license obligations, challenges to patent validity or enforceability, difficulties in protecting trade secrets, and costly litigation related to infringement or misappropriation - Failure to comply with obligations under the **exclusive license agreement with Endo Pharmaceuticals Inc.** for Haduvio could result in loss of critical license rights or damages[315](index=315&type=chunk)[316](index=316&type=chunk) - Inability to obtain and maintain sufficient patent protection for Haduvio or its indications, or if the scope is not broad enough, could allow competitors to commercialize similar products, adversely affecting business[320](index=320&type=chunk) - The patent application and approval process is expensive, time-consuming, and uncertain, with risks of challenges to validity, unenforceability, or narrow interpretation of claims[320](index=320&type=chunk)[322](index=322&type=chunk)[324](index=324&type=chunk) - Failure to protect the confidentiality of trade secrets, through breaches of non-disclosure agreements or independent development by competitors, could negatively impact product value and harm the business[329](index=329&type=chunk) - Involvement in intellectual property lawsuits, either to enforce patents or defend against infringement claims, could be costly, time-consuming, and divert management attention, with uncertain outcomes[330](index=330&type=chunk)[333](index=333&type=chunk)[334](index=334&type=chunk) - Changes in patent laws (e.g., **America Invents Act**) or their interpretation, both in the U.S. and internationally, could diminish the value of patents and impair the ability to protect products[336](index=336&type=chunk)[339](index=339&type=chunk) [Risks Related to Regulatory Approval and Other Legal Compliance Matters](index=60&type=section&id=Risks%20Related%20to%20Regulatory%20Approval%20and%20Other%20Legal%20Compliance%20Matters) The company faces extensive regulatory risks, including the uncertainty of the **505(b)(2) pathway** for Haduvio, lengthy and costly approval processes, challenges with foreign clinical trial data, and potential post-marketing restrictions, where compliance with anti-kickback, fraud and abuse, and global privacy laws is critical, with non-compliance leading to significant penalties - Uncertainty exists regarding the FDA's acceptance of the **Section 505(b)(2) regulatory pathway** for Haduvio, which could lead to longer development times, higher costs, and increased risks[349](index=349&type=chunk)[351](index=351&type=chunk) - The regulatory approval process is expensive, time-consuming, and uncertain, potentially preventing or delaying commercialization of Haduvio or any future product candidate[354](index=354&type=chunk)[355](index=355&type=chunk) - Data from clinical trials conducted outside the U.S. may not be accepted by the FDA, potentially requiring additional costly and time-consuming trials[358](index=358&type=chunk) - **Fast Track, Priority Review, Breakthrough Therapy, or PRIME designations** are not assured and do not guarantee faster development or approval, nor do they assure FDA approval[363](index=363&type=chunk)[365](index=365&type=chunk) - Post-marketing approval, products are subject to ongoing review and extensive regulation, including restrictions on manufacturing, labeling, advertising, and promotion, with potential for withdrawal from the market or substantial penalties for non-compliance[366](index=366&type=chunk)[367](index=367&type=chunk)[373](index=373&type=chunk)[375](index=375&type=chunk) - Relationships with healthcare providers and payors are subject to anti-kickback, fraud and abuse, and transparency laws (e.g., **Anti-Kickback Statute, False Claims Act, HIPAA, Sunshine Act**), with violations leading to significant civil and criminal penalties[393](index=393&type=chunk)[394](index=394&type=chunk)[395](index=395&type=chunk)[396](index=396&type=chunk)[398](index=398&type=chunk) - Compliance with global privacy and data security requirements (e.g., **GDPR, CCPA, CPRA**) could result in additional costs, liabilities, and inhibit data collection, with failure to comply leading to fines and reputational harm[402](index=402&type=chunk)[403](index=403&type=chunk) - Current and future legislation, such as the **ACA** and the **Inflation Reduction Act**, may increase the difficulty and cost of obtaining marketing approval and commercializing products, potentially limiting prices and revenues[380](index=380&type=chunk)[385](index=385&type=chunk)[389](index=389&type=chunk)[391](index=391&type=chunk) [Risks Related to Employee Matters and Managing our Growth](index=72&type=section&id=Risks%20Related%20to%20Employee%20Matters%20and%20Managing%20our%20Growth) The company's future success depends on retaining key executive and scientific personnel and effectively managing anticipated organizational growth, where challenges include intense competition for talent, potential difficulties in expanding sales and marketing capabilities, and risks of employee misconduct leading to significant liability and reputational harm - The company is highly dependent on its executive team (**Jennifer Good, Thomas Sciascia**) and other key personnel; loss of these individuals could impede research, development, and commercialization objectives[419](index=419&type=chunk) - Competition for qualified scientific, clinical, manufacturing, and sales/marketing personnel is intense, and the company may struggle to attract, retain, or motivate additional key employees[420](index=420&type=chunk) - Expected significant growth in employee numbers and operations, particularly for commercialization, could lead to difficulties in management, weaknesses in infrastructure, operational mistakes, and diversion of financial resources[422](index=422&type=chunk)[423](index=423&type=chunk) - Risks of employee misconduct, including fraud or non-compliance with regulatory standards, could result in significant liability, regulatory sanctions, and harm to the company's reputation[424](index=424&type=chunk) [Risks Related to Our Common Stock](index=73&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) The company's common stock faces risks including potential delisting from Nasdaq, high price volatility influenced by numerous factors, and the negative impact of future stock sales by the company or significant stockholders, where the substantial number of outstanding warrants could also dilute ownership and complicate future equity offerings - An active trading market for the common stock may not be sustainable, and failure to comply with **Nasdaq's continued listing requirements** (e.g., **$1.00 minimum bid price**) could lead to delisting, reducing liquidity and access to capital markets[425](index=425&type=chunk)[426](index=426&type=chunk)[430](index=430&type=chunk) - The trading price of common stock is highly volatile, influenced by clinical trial results, regulatory actions, competition, financing efforts, and broader economic conditions, potentially resulting in substantial losses for investors[431](index=431&type=chunk)[432](index=432&type=chunk)[433](index=433&type=chunk) - Future sales of common stock by the company, employees, or significant stockholders (including through ATM sales, private placements, and warrant exercises) could negatively affect the stock price due to dilution or market perception[436](index=436&type=chunk)[439](index=439&type=chunk)[440](index=440&type=chunk)[448](index=448&type=chunk) - The significant number of shares underlying outstanding warrants (**48,330,707 as of Sep 30, 2022**) could negatively impact the market price and make future equity offerings more difficult, and in a sale of the company, warrant holders could receive disproportionately higher consideration[450](index=450&type=chunk)[452](index=452&type=chunk)[453](index=453&type=chunk) - Ownership of common stock is concentrated among executive officers, directors, and their affiliates (approx. **37.1% as of Nov 10, 2022**), potentially limiting new investors' influence over corporate decisions and affecting control changes[454](index=454&type=chunk) - The company does not anticipate paying cash dividends, requiring stockholders to rely solely on stock price appreciation for returns[456](index=456&type=chunk) - Provisions in organizational documents and Delaware law (e.g., **classified board, advance notice requirements, Section 203**) may discourage or prevent changes in management or acquisitions, potentially limiting stockholder influence[465](index=465&type=chunk)[466](index=466&type=chunk) [Risks Related to Our Business Operations](index=83&type=section&id=Risks%20Related%20to%20Our%20Business%20Operations) The company faces ongoing risks from health epidemics like COVID-19, which have caused clinical trial delays and operational disruptions, where system failures, including cyberattacks or data breaches, could also severely impact business operations, data integrity, and reputation - Health epidemics, such as the **COVID-19 pandemic**, have delayed clinical trials (**Phase 2 CANAL, Phase 2b/3 PRISM**) and disrupted business operations, with potential for continued adverse impacts on clinical activities, supply chain, and financial condition[470](index=470&type=chunk)[472](index=472&type=chunk)[474](index=474&type=chunk) - System failures, including computer viruses, unauthorized access, natural disasters, or cyberattacks, could disrupt operations, lead to loss or damage of data (e.g., clinical trial data), and result in legal claims or regulatory penalties[413](index=413&type=chunk)[414](index=414&type=chunk)[415](index=415&type=chunk) [Item 5. Other Information](index=83&type=section&id=Item%205.%20Other%20Information) This section reports a subsequent event regarding a change in executive roles, specifically Dr. Thomas Sciascia transitioning from Chief Medical Officer to Chief Scientific Officer, effective November 14, 2022 - Dr. Thomas Sciascia transitioned from Chief Medical Officer to Chief Scientific Officer, effective **November 14, 2022**[475](index=475&type=chunk) [Item 6. Exhibits](index=84&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including forms of warrants, consulting services agreements, certifications of principal executive and financial officers, and Inline XBRL documents - Exhibits include Form of Pre-Funded Warrant, Consulting Services Agreement, Certifications of Principal Executive and Financial Officers (pursuant to **Section 302** and **Section 906 of Sarbanes-Oxley Act**), and Inline XBRL documents[476](index=476&type=chunk) [Signatures](index=85&type=section&id=Signatures) This section contains the duly authorized signatures of the registrant's President and Chief Executive Officer, Jennifer L. Good, and Chief Financial Officer, Lisa Delfini, affirming the submission of the report on November 10, 2022 - The report was signed on **November 10, 2022**, by **Jennifer L. Good** (President and Chief Executive Officer) and **Lisa Delfini** (Chief Financial Officer)[481](index=481&type=chunk)

Trevi Therapeutics, Inc. (NASDAQ:TRVI) Q2 2022 Earnings Conference Call August 11, 2022 4:30 PM ET Company Participants Jennifer Good – President and Chief Executive Officer Lisa Delfini – Chief Financial Officer Bill Forbes – Chief Development Officer Conference Call Participants Annabel Samimy – Stifel Serge Belanger – Needham & Company Leland Gershell – Oppenheimer Nathan Weinstein – Aegis Operator Good afternoon, and welcome to the Trevi Therapeutics Second Quarter 2022 Earnings Conference Call. [Operat ...