f
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
Or
For the transition period from to
Commission File Number
(Exact Name of Registrant as Specified in Its Charter)
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Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Exchange Act:
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.:
Large accelerated filer ☐ | Accelerated filer ☐ |
☒ | Smaller reporting company |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.
Common Stock, $0.001 par value | Shares outstanding as of August 10, 2021: |
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 | |
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Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q, or this “Quarterly Report,” contains forward-looking statements that involve substantial risks and uncertainties. The forward-looking statements are contained principally in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but also are contained elsewhere in this Quarterly Report, as well as in sections such as “Risk Factors” that are incorporated by reference into this Quarterly Report from our most recent Annual Report on Form 10-K, or the “Annual Report.” In particular, we caution you that our forward-looking statements are subject to the ongoing and developing circumstances related to the COVID-19 pandemic, which may have a material adverse effect on our business, operations and future financial results. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain. Forward-looking statements include statements about:
● | our ability to successfully commercialize OLINVYK and any other product candidates for which we may obtain regulatory approval; |
● | our sales, marketing and manufacturing capabilities and strategies; |
● | any ongoing or planned clinical trials and preclinical studies for our product candidates; |
● | the extent of future clinical trials potentially required by the U.S. Food and Drug Administration for our product candidates; |
● | our ability to fund future operating expenses and capital expenditures with our current cash resources or to secure additional funding in the future; |
● | the timing and likelihood of obtaining and maintaining regulatory approvals for our product candidates; |
● | our plan to develop and potentially commercialize our product candidates; |
● | the clinical utility and potential market acceptance of our product candidates, particularly in light of existing and future competition; |
● | the size of the markets for our product candidates; |
● | the performance of third-parties upon which we depend, including contract manufacturing organizations, suppliers, contract research organizations, distributors and logistic providers; |
● | our ability to identify or acquire additional product candidates with significant commercial potential that are consistent with our commercial objectives; |
● | the extent to which health epidemics and other outbreaks of communicable diseases, including the ongoing COVID-19 pandemic, could disrupt our operations and/or materially and adversely affect our business and financial conditions; |
● | our intellectual property position and our ability to obtain and maintain patent protection and defend our intellectual property rights against third parties; |
● | ongoing litigation; and |
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● | our ability to satisfy all applicable Nasdaq continued listing requirements. |
You should refer to the “Risk Factors” section of this Quarterly Report and our Annual Report for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
iv
PART I
ITEM 1. FINANCIAL STATEMENTS
TREVENA, INC.
Balance Sheets
(in thousands, except share and per share data)
| June 30, 2021 |
| December 31, 2020 | |||
(unaudited) | ||||||
Assets |
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Current assets: |
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Cash and cash equivalents | $ | | $ | | ||
Accounts receivable, net | | | ||||
Inventories | | — | ||||
Insurance recovery | | | ||||
Prepaid expenses and other current assets |
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Total current assets |
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Restricted cash |
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Property and equipment, net |
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Right-of-use lease asset | | | ||||
Other assets |
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Total assets | $ | | $ | | ||
Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable, net | $ | | $ | | ||
Accrued expenses and other current liabilities |
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Estimated settlement liability | | | ||||
Lease liability | | | ||||
Total current liabilities |
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Leases, net of current portion |
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Warrant liability |
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Total liabilities |
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Commitments and contingencies (Note 6) |
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Stockholders’ equity: |
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Common stock—$ |
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Preferred stock—$ |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity | $ | | $ | |
See accompanying notes to financial statements.
1
TREVENA, INC.
Statements of Operations and Comprehensive Loss (Unaudited)
(in thousands, except share and per share data)
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Revenue: |
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Product revenue | $ | | $ | — | $ | | $ | — | ||||
Total revenue |
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Operating expenses: |
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Cost of goods sold | | — | | — | ||||||||
Selling, general and administrative |
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Research and development |
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Total operating expenses |
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Loss from operations |
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Other income (expense): |
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Change in fair value of warrant liability |
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Other income, net |
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Interest income |
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Interest expense |
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(Loss) gain on foreign currency exchange | — | — | ( | | ||||||||
Total other income |
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Net loss and comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Per share information: |
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Net loss per share of common stock, basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Weighted average common shares outstanding, basic and diluted |
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See accompanying notes to financial statements.
2
TREVENA, INC.
Statement of Stockholders’ Equity (Unaudited)
(in thousands, except share data)
Stockholders' Equity | ||||||||||||||
Common Stock | ||||||||||||||
Number | $ | Additional | Total | |||||||||||
of | Par | Paid-in | Accumulated | Stockholders' | ||||||||||
| Shares |
| Value |
| Capital |
| Deficit |
| Equity | |||||
Balance, January 1, 2021 |
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Stock-based compensation expense |
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Exercise of stock options |
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Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes |
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Issuance of common stock, net of issuance costs |
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Net loss |
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Balance, March 31, 2021 |
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Stock-based compensation expense |
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Exercise of stock options |
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Issuance of common stock, net of issuance costs |
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Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes |
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Net loss |
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Balance, June 30, 2021 |
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Balance, January 1, 2020 |
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Stock-based compensation expense |
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Issuance of common stock, net of issuance costs |
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Net loss |
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Balance, March 31, 2020 |
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Stock-based compensation expense |
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Issuance of common stock, net of issuance costs |
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Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes |
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Net loss |
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Balance, June 30, 2020 |
| | $ | | $ | | $ | ( | $ | | ||||
See accompanying notes to financial statements.
3
TREVENA, INC.
Statements of Cash Flows (Unaudited)
(in thousands)
Six Months Ended | ||||||
June 30, | ||||||
| 2021 |
| 2020 | |||
Operating activities: | ||||||
Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Stock-based compensation |
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Noncash interest expense on loans |
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Revaluation of warrant liability |
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Change in right-of-use asset | | | ||||
Changes in operating assets and liabilities: |
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Accounts receivable, prepaid expenses and other assets |
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Inventories | ( | — | ||||
Operating lease liabilities | ( | ( | ||||
Accounts payable, accrued expenses and other liabilities |
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Net cash used in operating activities |
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Investing activities: |
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Long term deposits | ( | — | ||||
Maturities of marketable securities |
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Net cash (used in) provided by investing activities |
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Financing activities: |
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Proceeds from exercise of common stock options |
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Proceeds from issuance of common stock, net |
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Payment of employee withholding taxes on vested restricted stock units | ( | — | ||||
Finance lease payments |
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Repayments of loans payable, net | — | ( | ||||
Net cash provided by financing activities |
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Net decrease in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash—beginning of period |
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Cash, cash equivalents and restricted cash—end of period | $ | | $ | | ||
Supplemental disclosure of cash flow information: |
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Cash paid for interest | $ | — | $ | |
See accompanying notes to financial statements.
4
TREVENA, INC.
Notes to Unaudited Financial Statements
June 30, 2021
1. Organization and Description of the Business
Trevena, Inc., or the Company, was incorporated in Delaware as Parallax Therapeutics, Inc. in November 2007. The Company began operations in December 2007, and its name was changed to Trevena, Inc. in January 2008. The Company is a biopharmaceutical company focused on the development and commercialization of novel medicines for patients affected by central nervous system, or CNS, disorders. The Company operates in
Since commencing operations in 2007, the Company has devoted substantially all of its financial resources and efforts to commercializing its lead asset, OLINVYK® (oliceridine) injection, or OLINVYK, and to research and development, including nonclinical studies and clinical trials. The Company has never been profitable. In August 2020, the United States Food and Drug Administration, or FDA, approved the new drug application, or NDA, for OLINVYK. The Company initiated commercial launch of OLINVYK in the first quarter of 2021.
Since its inception, the Company has incurred losses and negative cash flows from operations. At June 30, 2021, the Company had an accumulated deficit of $
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP. Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the ASC and Accounting Standards Update, or ASU, of FASB. The Company’s functional currency is the U.S. dollar.
The financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of the Company’s balance sheets as of June 30, 2021, its results of operations and its comprehensive loss for the three and six months ended June 30, 2021 and 2020, its statement of stockholders’ equity for the period from January 1, 2021 to June 30, 2021 and for the period January 1, 2020 to June 30, 2020, and its statements of cash flows for the six months ended June 30, 2021 and 2020. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the financial statements and accompanying notes included in the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2020. Since the date of those financial statements, there have been no changes to the Company’s significant accounting policies. The financial data and other information disclosed in these notes related to the six months ended June 30, 2021 and 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period.
We have been actively monitoring the novel coronavirus, or COVID-19, situation and its impact globally. Remote working arrangements and travel restrictions imposed by various jurisdictions have had a limited impact on our ability to maintain operations during the quarter. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are
5
highly uncertain, including vaccine adoption and effectiveness, the impact of emerging variants of the novel coronavirus, the actions taken to contain or treat COVID-19, including as a result of new information that may emerge concerning COVID-19.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. These estimates and assumptions are based on current facts, historical experience as well as other pertinent industry and regulatory authority information, including the potential future effects of COVID-19, the results of which form the basis for making judgements about the carrying values of assets and liabilities and the recording expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.
Fair Value of Financial Instruments
The carrying amount of the Company’s financial instruments, which include cash and cash equivalents, marketable securities, restricted cash, accounts payable and accrued expenses approximate their fair values, given their short-term nature. Certain of the Company’s common stock warrants are carried at fair value, as disclosed in Note 5.
Recently Adopted Accounting Standards
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which removed certain exceptions to the general principles of the accounting for income taxes and also improves consistent application of and simplification of other areas when accounting for income taxes. The effective date for this standard was January 1, 2021. The Company adopted this standard on January 1, 2021. There was no impact to the Company’s financial statements or related disclosures upon the adoption.
3. Fair Value of Financial Instruments
ASC 820, Fair Value Measurement, establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.
ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes among the following:
● | Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. |
● | Level 2 – Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly. |
● | Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
6
Cash, Cash Equivalents and Marketable Securities
The following table presents fair value of the Company’s cash, cash equivalents, and marketable securities as of June 30, 2021 and December 31, 2020 (in thousands):
June 30, 2021 | |||||||||||||||||||||
| Adjusted | Unrealized | Unrealized | Cash and Cash | Restricted | Marketable | |||||||||||||||
Cost |
| Gains |
| Losses |
| Fair Value |
| Equivalents |
| Cash |
| Securities | |||||||||
Cash | $ | | $ | — | $ | — | $ | | $ | | $ | | $ | — | |||||||
Level 1 (1): |
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Money market funds |
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Subtotal |
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Total | $ | | $ | — | $ | — | $ | | $ | | $ | | $ | — |
December 31, 2020 | |||||||||||||||||||||
Adjusted | Unrealized | Unrealized | Cash and Cash | Restricted | Marketable | ||||||||||||||||
| Cost |
| Gains |
| Losses |
| Fair Value |
| Equivalents |
| Cash |
| Securities | ||||||||
Cash | $ | | $ | — | $ | — | $ | | $ | | $ | | $ | — | |||||||
Level 1 (1): |
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Money market funds |
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Subtotal |
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Total | $ | | $ | — | $ | — | $ | | $ | | $ | | $ | — |
(1) | The fair value of Level 1 securities is estimated based on quoted prices in active markets for identical assets or liabilities. |
The Company classifies investments available to fund current operations as current assets on its balance sheets. As of June 30, 2021, the Company did not hold any investment securities exceeding a one-year maturity.
The Company maintains $
Unrealized gains and losses on marketable securities are recorded as a separate component of accumulated other comprehensive income (loss) included in stockholders’ equity. Realized gains (losses) are included in interest income (expense) in the statement of operations and comprehensive income (loss) on a specific identification basis. The Company did not record any realized gains or losses during the three and six months ended June 30, 2021 and 2020. To date, the Company has not recorded any impairment charges on marketable securities related to other-than-temporary declines in market value.
Accretion of bond discount on marketable securities is included in other income as a separate component of other income (expense) on the statement of operations and comprehensive loss. Interest income on marketable securities is recorded as interest income on the statement of operations and comprehensive loss.
The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers between Level 2 and Level 3 during the six months ended June 30, 2021, or the year ended December 31, 2020.
4. Inventories, net
Inventories are valued at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method for all inventories. Inventory includes the cost of API, raw materials and third-party contract manufacturing and packaging services. Indirect overhead costs associated with production and distribution are recorded as period costs in the period incurred. OLINVYK was approved by the FDA in August 2020. Prior to FDA approval, all manufacturing costs for OLINVYK were expensed to research and development. Upon FDA approval, manufacturing costs for OLINVYK manufactured for commercial sale have been capitalized as inventory cost. Costs of drug product to be consumed in any current or future clinical trials will continue to be recognized as research and development expense.
7
The Company periodically evaluates the carrying value of inventory on hand using the same lower of cost or net realizable value approach as that used to initially value the inventory. Valuation adjustments may be required for slow-moving or obsolete inventory or in any situations where market conditions have caused net realizable value to fall below the carrying cost of the inventory.
5. Stockholders’ Equity
Equity Offerings
Under its certificate of incorporation, the Company was authorized to issue up to
ATM Programs
In April 2019, the Company entered into a Common Stock Sales Agreement with H.C. Wainwright & Co., LLC, or Wainwright, pursuant to which the Company may offer and sell through Wainwright, from time to time at the Company’s sole discretion, shares of its common stock, having an aggregate offering price of up to $
Registered Direct Offering and Concurrent Warrant Issuance
In January 2019, the Company entered into securities purchase agreements with
Equity Incentive Plans
In 2008, the Company adopted the 2008 Equity Incentive Plan, as amended on February 29, 2008, January 7, 2010, July 8, 2010, December 10, 2010, June 23, 2011 and June 17, 2013, collectively, the 2008 Plan, that authorized the Company to grant restricted stock and stock options to eligible employees, directors and consultants to the Company.
In 2013, the Company adopted the 2013 Equity Incentive Plan, as amended on May 14, 2014, collectively, 2013 Plan. The 2013 Plan became effective upon the Company’s entry into the underwriting agreement related to its IPO
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in January 2014 and, as of such date, no further grants were permitted under the 2008 Plan. The 2013 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards and other forms of equity compensation (collectively, stock awards), all of which may be granted to employees, including officers, non-employee directors and consultants of the Company. Additionally, the 2013 Plan provides for the grant of cash and stock-based performance awards. The 2013 Plan contains an “evergreen” provision, pursuant to which the number of shares of common stock available for issuance under the plan automatically increases on January 1 of each year beginning in 2015.
On December 15, 2016, the Company adopted the Trevena, Inc. Inducement Plan, or the Inducement Plan, effective January 1, 2017, pursuant to which the Company reserved
Under all such plans, the amount, terms of grants and exercisability provisions are determined by the board of directors or its designee. The term of the options may be up to
The estimated grant-date fair value of the Company’s stock-based awards is amortized on a straight-line basis over the awards’ service periods. Stock-based compensation expense recognized was as follows (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 |
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Research and development | $ | | $ | | $ | | $ | | |||||
Selling, general and administrative |
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Cost of goods sold | | — | | — | |||||||||
Total stock-based compensation | $ | | $ | | $ | | $ | |
Stock Options
A summary of stock option activity and related information through June 30, 2021 follows:
Options Outstanding | |||||||
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Average | |||||||
Weighted | Remaining | ||||||
Average | Contractual | ||||||
Number of | Exercise | Term | |||||
Shares | Price | (in years) | |||||
Balance, December 31, 2020 |
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Granted |
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Exercised |
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Forfeited/Cancelled |
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Balance, June 30, 2021 |
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Vested or expected to vest at June 30, 2021 |
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Exercisable at June 30, 2021 |
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The aggregate intrinsic value of options exercisable as of June 30, 2021 was $
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The Company uses the Black-Scholes option pricing model to estimate the fair value of stock options at the grant date. The Black-Scholes model requires the Company to make certain estimates and assumptions, including estimating the fair value of the Company’s common stock, assumptions related to the expected price volatility of the Company’s common stock, the period during which the options will be outstanding, the rate of return on risk-free investments and the expected dividend yield for the Company’s common stock.
The per-share weighted-average grant date fair value of the options granted to employees and directors during the six months ended June 30, 2021 and 2020 was estimated at $
June 30, | ||||||
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Expected term of options (in years) |
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Risk-free interest rate |
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Expected volatility |
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Dividend yield |
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Restricted Stock Units
RSU-related expense is recognized on a straight-line basis over the vesting period. Upon vesting, these awards may be settled on a net-exercise basis to cover any required withholding tax with the remaining amount converted into an equivalent number of shares of common stock.
The following is a summary of changes in the status of non-vested RSUs during the year:
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Weighted | |||||
Average | |||||
Number of | Grant Date | ||||
Awards | Fair Value | ||||
Non-vested at December 31, 2020 |
| | $ | | |
Granted |
| — | — | ||
Vested |
| ( | | ||
Forfeited |
| ( | | ||
Non-vested at June 30, 2021 |
| | $ | |
For the six months ended June 30, 2021, the Company recorded $
As of June 30, 2021, there was $
Shares Available for Future Grant
At June 30, 2021, the Company has the following shares available to be granted under its equity incentive plans:
|
| Inducement | ||
2013 Plan | Plan | |||
Available at December 31, 2020 |
| |
| |
Authorized |
| | — | |
Granted |
| ( | — | |
Shares withheld for taxes not issued | | — | ||
Forfeited/Cancelled |
| | — | |
Available at June 30, 2021 |
| |
| |
10
Shares Reserved for Future Issuance
At June 30, 2021, the Company has reserved the following shares of common stock for issuance:
Stock options outstanding under 2013 Plan |
| |
Restricted stock units outstanding under 2013 Plan | | |
Shares reserved for future issuance under 2013 Plan |
| |
Stock options outstanding under Inducement Plan |
| |
Shares reserved for future issuance under Inducement Plan |
| |
Shares reserved for future issuance under 2013 Employee Stock Purchase Plan |
| |
Warrants outstanding |
| |
Total shares of common stock reserved for future issuance |
| |
6. Commitments and Contingencies
Leases
The Company leases office space in Chesterbrook, Pennsylvania and equipment. The Company’s principal office is located at 955 Chesterbrook Boulevard, Chesterbrook, Pennsylvania, where the Company currently leases approximately
Supplemental balance sheet information related to leases was as follows (in thousands):
| June 30, 2021 |
| December 31, 2020 | ||||
Operating leases: |
|
|
|
| |||
| $ | |
| $ | | ||
| | ||||||
| | ||||||
$ | | $ | | ||||
Finance leases: | |||||||
Property and equipment, at cost | $ | | $ | | |||
Accumulated depreciation | ( | ( | |||||
Property and equipment, net | | | |||||
| | ||||||
| | ||||||
$ | | $ | |
11
The components of lease expense were as follows (in thousands):
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Operating lease costs: | ||||||||||||
Operating lease rental expense | $ | | $ | | $ | | $ | | ||||
Other income | ( | ( | ( | ( | ||||||||
Total operating lease costs | $ | | $ | | $ | | $ | | ||||
Finance lease costs: | ||||||||||||
Amortization of right-of-use assets | ||||||||||||
Interest on lease liabilities | — | — | — | — | ||||||||
Total finance lease costs | $ | | $ | | $ | | $ | |
Supplemental cash flow information related to leases was as follows (in thousands):
Six Months Ended | ||||||
June 30, | ||||||
| 2021 |
| 2020 | |||
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
| ||
Operating cash flows from operating leases | $ | ( | $ | ( | ||
Operating cash flows from finance leases |
| — |
| — | ||
Financing cash flows from finance leases | ( |
| ( |
Our operating lease liabilities will mature, as follows (in thousands):
| Operating Leases |
| Financing Leases | |||
2021 (July 1 - December 31) | $ | | $ | | ||
2022 | | | ||||
2023 | | — | ||||
2024 | | — | ||||
2025 | | — | ||||
2026 and beyond | | — | ||||
Total minimum lease payments | $ | | $ | | ||
Interest Expense | ( | - | ||||
Lease liability | $ | | $ | |
Per the terms of our sublease, we expect the following inflows (in thousands):
| Sublease | ||
2021 (July 1 - December 31) | $ | | |
2022 | | ||
2023 |
| | |
2024 | | ||
2025 |
| — | |
2026 and beyond |
| — | |
Total minimum lease payments | $ | |
12
Lease term and discount rates are as follows:
Six Months Ended June 30, | ||||||
| 2021 |
| 2020 | |||
Weighted average remaining lease term (years) | ||||||
Operating leases | ||||||
Finance leases | ||||||
Weighted average discount rate | ||||||
Operating leases | ||||||
Finance leases |
Legal Proceedings
In October and November 2018, the Company and certain current and former officers and directors were sued in
In December 2018, a shareholder derivative action was filed on behalf of the Company and against certain current and former officers and directors in the EDPA, and in February 2019,
7. Product Revenue
Performance Obligation
The Company’s performance obligation is the supply of finished pharmaceutical products to its customers. The Company’s customers consist of major wholesale distributors. The Company’s customer contracts generally consist of both a master agreement, which is signed by the Company and its customer, and a customer submitted purchase order, which is governed by the terms and conditions of the master agreement.
13
Revenue is recognized when the Company transfers control of its products to the customer, which occurs at a point-in-time, upon delivery.
The Company offers standard payment terms to its customers and has elected the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing, since the period between when the Company transfers the product to the customer and when the customer pays for that product is one year or less. Taxes collected from customers relating to product revenue and remitted to governmental authorities are excluded from revenues. The consideration amounts due from customers as a result of product revenue are subject to variable consideration.
The Company offers standard product warranties which provide assurance that the product will function as expected and in accordance with specifications. Customers cannot purchase warranties separately and these warranties do not give rise to a separate performance obligation. The Company permits the return of product under certain circumstances, mainly upon at or near product expiration, instances of shipping errors or where product is damaged in transit. The Company accrues for the customer’s right to return as part of its variable consideration.
Concentration of Revenue
The following table presents a rollforward of the major categories of sales-related deductions included in trade receivable allowances for the six months ended June 30, 2021 (in thousands):
| Sales Discounts |
| Chargebacks |
| Fee for Service | ||||
Balance, January 1, 2021 | $ | | $ | | $ | | |||
Provision related to current period sales | | | |