Trevi Therapeutics(US:TRVI)2023-05-11 20:11PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (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 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 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 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 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 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 nodularis27 - 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 Europe28 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 premium127 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 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 nodularis131 - 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)132133 - 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 endpoints136 - 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 supply138 - 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 future139 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 agreement134 - 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 weeks135 - 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 development137 - As of March 31, 2023, cash, cash equivalents, and marketable securities totaled $111.3 million, expected to fund operating expenses and capital expenditures into 2026147148 Components of Operating Results 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 activities151 - G&A expenses consist of personnel costs, professional fees (legal, consulting, accounting), rent, and other operating expenses153 - Other income, net for Q1 2023 included income from an employee retention tax credit under the CARES Act156 - 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 fee158159 Results of Operations 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 completions163 - G&A expenses increased by $0.183 million YoY, primarily due to higher personnel-related expenses and tax professional fees164 - 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 credit165 Liquidity and Capital Resources 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 loans166 - 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 premium146171 - As of March 31, 2023, the company held $111.3 million in cash, cash equivalents, and marketable securities, projected to fund operations into 2026147148183 - 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 activities149150181182 Critical Accounting Policies and Use of Estimates 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 measurements188189 - No material changes to critical accounting policies occurred during the three months ended March 31, 2023189 Recently Adopted Accounting Pronouncements 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, 2023190 Recently Issued Accounting Pronouncements 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 statements191 Item 3. Quantitative and Qualitative Disclosures About Market Risk 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 risk192 Item 4. Controls and Procedures 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, 2023193 - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2023194 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently subject to any material legal proceedings - The company is not subject to any material legal proceedings195 Item 1A. Risk Factors 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, 2023197 - Future profitability is uncertain and dependent on successful development, marketing approval, and commercialization of Haduvio, which will require substantial additional funding199203206 - The company is highly dependent on Haduvio, its sole product candidate, and its success is critical for the business213 - Clinical drug development is lengthy, expensive, and uncertain, with risks including unfavorable trial results, enrollment delays, unexpected side effects, and regulatory hurdles218219 - 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 interruptions281284286 Risks Related to Our Financial Position and Need for Additional Capital 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, 2023197 - 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 activities203204 - Failure to raise sufficient capital on acceptable terms could force delays, reductions, or abandonment of product development programs or commercialization efforts205206 - Raising additional capital through equity sales may dilute stockholders, while debt financing could impose restrictive covenants and fixed payment obligations210211 Risks Related to the Development and Commercialization of Haduvio and Any Future Product Candidates 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 nodularis213214 - 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 pain217 - Clinical trials are expensive, lengthy, and uncertain, with risks including unfavorable results, enrollment delays (exacerbated by COVID-19), and the need for additional trials218219220235 - 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 warning240241244 - 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 potential245246249 - 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 substantial256267269270 Risks Related to Our Dependence on Third Parties 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 cGCPs281282283 - 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 costs284285286 - Mallinckrodt's recent emergence from bankruptcy adds uncertainty regarding its ability to continue supplying nalbuphine hydrochloride drug substance286 - 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-performance291292294295 Risks Related to Our Intellectual Property 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 damages297298 - 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 laws301303305 - Competitors may develop similar products, circumvent patents, or seek generic approvals, potentially eroding competitive advantage308 - Inability to protect trade secrets through confidentiality agreements could harm the business if proprietary information is disclosed or independently developed by competitors310 - Intellectual property litigation (infringement claims, counterclaims, validity challenges) is costly, time-consuming, and uncertain, potentially diverting resources and harming business311312314 - 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 position316317319320321323 Risks Related to Regulatory Approval and Other Legal Compliance Matters 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 riskier331332 - The regulatory approval process is expensive, time-consuming, and uncertain, with no guarantee of approval, and any approval may be limited or subject to restrictions335336337 - Data from clinical trials conducted outside the U.S. may not be accepted by the FDA, potentially requiring additional costly and time-consuming trials339 - 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 penalties347348350351354356 - Inadequate funding or disruptions at regulatory agencies (FDA, SEC) could delay reviews and approvals, negatively impacting business operations357358359360361 - Healthcare reform initiatives (e.g., ACA, IRA) and legislative efforts to control drug prices could increase costs, reduce reimbursement, and adversely affect profitability362363367368371372375 - 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 harm377378379380381382385386387 Risks Related to Employee Matters and Managing our Growth 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 personnel401402403 - Expected significant growth in employees and operations, particularly for commercialization, may lead to difficulties in management, infrastructure weaknesses, and diversion of financial resources404 - 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 harm405 Risks Related to Our Common Stock 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 ability406 - 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 access407408412 - The trading price of the common stock is highly volatile, influenced by clinical trial results, regulatory actions, competition, financing efforts, and broader market conditions413414415 - 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 perception418421423430 - 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 company431432433435 - 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 control436 Risks Related to Our Business Operations 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 markets453455456 - 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 reputation396397 - Approval of generic versions of Haduvio or other small molecule products, or insufficient exclusivity periods, could adversely affect future revenue and profitability398400 - Operating as a public company incurs increased legal, accounting, and investor relations costs, and requires substantial management time for compliance initiatives and corporate governance439440 - 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 changes442443444 Item 5. Other Information 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, 2023457 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 payoff458 Item 6. Exhibits 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 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, 2023464