Trevi Therapeutics(US:TRVI)2023-08-10 20:10PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (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 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 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 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 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 - 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 nodularis29 - 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.S30 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 premium79149 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 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 nodularis133 - 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 outcomes134 - Positive Phase 2b/3 data for Haduvio in prurigo nodularis (PRISM trial) showed statistically significant results on primary and all three key secondary endpoints137 - The Human Abuse Potential (HAP) study for oral nalbuphine ER is delayed due to a U.S. shortage of IV butorphanol, the comparator drug140 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 commercialization149193 Components of Operating Results - 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 launch153154 - 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 personnel155156 - 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 Loan157158159161 Results of Operations 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 expenses164169 Liquidity and Capital Resources - 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 warrants172173174175176 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 2026193 - 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 company190191 Item 3. Quantitative and Qualitative Disclosures About Market Risk 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 report201 Item 4. Controls and Procedures 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 CFO202 - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2023203 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings - The company is not subject to any material legal proceedings204 Item 1A. Risk Factors 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 - 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 profitability206207208 - 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 programs212214 - 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 sooner215216217 Risks Related to the Development and Commercialization of Haduvio and Any Future Product Candidates - 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 nodularis221222 - 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 treatments227228230243245246 - 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 depression250253 - 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 use254255257 Risks Related to Our Dependence on Third Parties - 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 cGCPs287288289290 - 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 cGMPs291293294296297 - 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 agreements299300301304 Risks Related to Our Intellectual Property - 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 enforceability309312314 - 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 business307308 - 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 terms321323324 - 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 advantage325328329330 Risks Related to Regulatory Approval and Other Legal Compliance Matters - 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 development339340344345 - 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 penalties357360361365366367 - Inadequate funding for regulatory agencies (FDA, SEC) or government shutdowns could delay product reviews and approvals, adversely impacting the business369370372 - 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 profitability373374375378379383384 - 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 harm389390391392393394398400401404 Risks Related to Employee Matters and Managing our Growth - The company's success is highly dependent on retaining key executive, scientific, clinical, manufacturing, and sales/marketing personnel, and competition for such talent is intense418420421 - Expanding the organization, particularly for commercialization, poses management challenges, including potential infrastructure weaknesses, operational mistakes, and diversion of financial resources422 - 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 harm423 Risks Related to Our Common Stock - 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 conditions424430431432 - 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 markets425429 - 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 stock435439445 - 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 consideration446448449 - Ownership of common stock is concentrated among executive officers and directors (approximately 35.6%), potentially limiting new investors' influence over significant corporate decisions450 Item 6. Exhibits 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 documents466467 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, 2023471