Trevi Therapeutics(TRVI) - 2023 Q3 - Quarterly Report

Front Matter CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA 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][7][11] - The company is not obligated to update forward-looking statements unless required by applicable law[8] - Industry and market data in the report are from third-party publications and company estimates, involving multiple assumptions and limitations, requiring investor caution[9] RISK FACTOR SUMMARY 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] - 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] - 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] - 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] - 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][14] - 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] PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (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 | 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 | 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 | 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 | 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 1. Nature of the Business 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] - 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] - 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] 2. Summary of Significant Accounting Policies 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][32] - Significant accounting estimates include research and development expense recognition, stock-based compensation valuation, and valuation allowance for deferred tax assets[34] - 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][39][40][41][42] - Research and development expenses are recognized as incurred, including personnel costs, consulting fees, contract manufacturing, and CRO fees[46] - 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][56] - 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][60][61] 3. Marketable Securities 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] 4. Fair Value Measurements 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 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] - In December 2022, the company entered into a 24-month finance lease agreement for furniture, with monthly payments of approximately $11 thousand[72] | 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 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 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] - 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] - 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] | 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] 8. Stockholders' Equity 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] - 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] | 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 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] - 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] 10. Net Loss per Share 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] - 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] | 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 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] - 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][118] - 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] 12. Commitments and Contingencies 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] - The company also has commitments under lease and license agreements[124] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - 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][130] - The Phase IIa RIVER clinical trial for refractory chronic cough commenced in November 2023, with top-line data expected in H2 2024[131] - 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][133][134] - 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] - 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][138][139][140][141][142][143][144] - 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][188] Components of Operating Results 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 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][148] - 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] General and Administrative Expenses 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] - General and administrative expenses are expected to increase due to higher personnel costs and infrastructure expansion[151] Other Income (Expense), Net 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] - 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] - Interest expense is primarily associated with the SVB term loan, which was fully repaid on May 9, 2023[154][156] - 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] Results of Operations 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 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] - 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] Comparison of the Nine Months Ended September 30, 2023 and 2022 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] - 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] Liquidity and Capital Resources 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 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] - As of September 30, 2023, the company held $88.9 million in cash, cash equivalents, and marketable securities[144] - The company expects its existing cash, cash equivalents, and marketable securities to fund operating expenses and capital expenditure requirements into 2026[144][188] - 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][146] SVB Loan Agreement 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] - 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] - 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] - 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][175][176] Cash Flows 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] - 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] - 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] Funding Requirements 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] - 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] - The company requires substantial additional capital to support ongoing operations, potentially raised through equity offerings, debt financing, or collaborative and licensing arrangements[185][190] - Failure to obtain timely and sufficient funding may lead to delays, reductions, or abandonment of product development and commercialization efforts[191] - Equity financing may dilute existing stockholders' equity, while debt financing may impose fixed payment obligations and restrictive covenants[190] Critical Accounting Policies and Use of Estimates 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] - There were no significant changes to critical accounting policies for the nine months ended September 30, 2023[193] Recently Adopted Accounting Pronouncements 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] Recently Issued Accounting Pronouncements 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not applicable - This section is not applicable[197] Item 4. Controls and Procedures 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] - There were no material changes in internal control over financial reporting during the three months ended September 30, 2023[198] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently facing any material legal proceedings - The company is not currently facing any material legal proceedings[199] Item 1A. Risk Factors 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 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] - 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][203] - 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][209] - 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][209][214][215][216] - 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] Risks Related to the Development and Commercialization of Haduvio and Any Future Product Candidates 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][218][219][221] - 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][224][227][238][239][243] - 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][248] - 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][249][250][251][253] - 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][262][269][270][271][272][273][274][276][277][278][279][280][281][282] - The company's limited resource allocation may lead to missed opportunities for other potentially more commercially viable products or indications[263][264] Risks Related to Our Dependence on Third Parties 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][287][288] - 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][290][291][292] - 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][294][295] - 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][266][267][268][297][298] - 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][301] Risks Related to Our Intellectual Property 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][304] - 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] - 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] - 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][322][323][324][325][326] - Failure to protect the confidentiality of trade secrets could negatively impact the value of the company's products and business[316] - 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][318][319][320][321] - 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][328][329] Risks Related to Regulatory Approval and Other Legal Compliance Matters 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][338][339][340][341] - 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][343][344][345][346] - The FDA may not accept clinical trial data conducted overseas, leading to additional delays and expenses[347][348] - 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][353] - 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][355][356][357][358][359][360] - Insufficient government agency funding (e.g., government shutdowns) could hinder timely development or commercialization of new products, negatively impacting the company's business[365][366][367][368] - 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][370][371][372][373][374][375][376][377][378][379][380][381][382] - 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][384][385][386][387][388][389][390][391] - 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][393][394][395][396] - Failure to comply with international operating laws (e.g., FCPA, anti-bribery laws) could lead to significant civil and criminal penalties[397][398][399][400][401][402] - Failure to comply with environmental, health, and safety laws and regulations could result in fines or costs and harm the company's business[403][404][405] - System failures could lead to business interruptions, data loss, or breaches, damaging the company's reputation and delaying product development[406][407] - 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][409][410][411] Risks Related to Employee Matters and Managing our Growth 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] - 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][414] - 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] - 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][417] Risks Related to Our Common Stock 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][425] - 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][420][421][422][423] - 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][430][431][432][433][434][435][436][437][438][439][440][441][442][443][444] - 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] - 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][447] - 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] - 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][450][451] - 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][453][454][455][456] - 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][458] - 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][460] Item 6. Exhibits 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 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][467]