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Table of Contents

f

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

Or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to

Commission File Number 001-36193

Trevena, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of Incorporation or Organization)

26-1469215
(I.R.S. Employer Identification No.)

955 Chesterbrook Boulevard, Suite 110
Chesterbrook, PA
(Address of Principal Executive Offices)

19087
(Zip Code)

Registrant’s telephone number, including area code: (610354-8840

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

TRVN

The Nasdaq Stock Market LLC

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. Yes   No 

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). Yes   No 

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 

Non-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   No 

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 9, 2022: 173,681,085

Table of Contents

TABLE OF CONTENTS

Page

Cautionary Note Regarding Forward-Looking Statements

iii

PART I- FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements (Unaudited)

1

Consolidated Balance Sheets

1

Consolidated Statements of Operations and Comprehensive Loss

2

Consolidated Statements of Stockholders’ Equity

3

Consolidated Statements of Cash Flows

4

Notes to Unaudited Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4.

Controls and Procedures

25

PART II- OTHER INFORMATION

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

27

Item 3.

Defaults Upon Senior Securities

28

Item 4.

Mine Safety Disclosures

28

Item 5.

Other Information

28

Item 6.

Exhibits

28

SIGNATURES

29

ii

Table of Contents

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 nonclinical 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 logistics 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 and the effects to mitigate it, 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; and
our ability to satisfy all applicable Nasdaq continued listing requirements.

iii

Table of Contents

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

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PART I

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

TREVENA, INC.

Consolidated Balance Sheets (Unaudited)

(in thousands, except share and per share data)

    

June 30, 2022

    

December 31, 2021

Assets

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

19,589

$

66,923

Marketable securities

29,934

 

Inventories

2,990

2,352

Prepaid expenses and other current assets

3,270

 

1,448

Total current assets

 

55,783

 

70,723

Restricted cash

 

2,911

 

1,311

Property and equipment, net

 

1,631

 

1,841

Right-of-use lease asset

4,474

4,706

Other assets

 

3

 

1,543

Total assets

$

64,802

$

80,124

Liabilities and stockholders’ equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable, net

$

2,719

$

4,547

Accrued expenses and other current liabilities

 

5,951

 

3,847

Lease liability

839

792

Total current liabilities

 

9,509

 

9,186

Loan payable, net

 

13,472

 

Leases, net of current portion

 

5,879

 

6,309

Total liabilities

 

28,860

 

15,495

Commitments and contingencies (Note 9)

 

  

 

  

Stockholders’ equity:

 

  

 

  

Preferred stock—$0.001 par value; 5,000,000 shares authorized, none issued or outstanding at June 30, 2022 and December 31, 2021

 

 

Common stock—$0.001 par value; 200,000,000 shares authorized at June 30, 2022 and December 31, 2021; 165,681,085 and 165,520,007 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

 

165

 

165

Additional paid-in capital

 

561,332

 

558,566

Subscription receivable

(23)

Accumulated deficit

 

(525,472)

 

(494,102)

Accumulated other comprehensive loss

 

(60)

 

Total stockholders’ equity

 

35,942

 

64,629

Total liabilities and stockholders’ equity

$

64,802

$

80,124

See accompanying notes to consolidated financial statements.

1

Table of Contents

TREVENA, INC.

Consolidated 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, 

    

2022

    

2021

    

2022

    

2021

Revenue:

  

  

  

  

Product revenue

$

$

178

$

$

387

License revenue

20

Total revenue

 

 

178

 

20

 

387

Operating expenses:

 

 

 

 

Cost of goods sold

216

258

423

421

Selling, general and administrative

 

10,306

 

10,545

 

21,320

 

17,913

Research and development

 

4,291

 

3,449

 

9,550

 

6,085

Total operating expenses

 

14,813

 

14,252

 

31,293

 

24,419

Loss from operations

 

(14,813)

 

(14,074)

 

(31,273)

 

(24,032)

Other income (expense):

 

  

 

  

 

  

 

Change in fair value of warrant liability

 

 

2

 

 

5

Other income, net

 

64

 

7

 

109

 

76

Interest income

 

95

 

43

 

119

 

91

Interest expense

 

(325)

 

(325)

 

Loss on foreign currency exchange

(2)

(4)

Total other income (expense), net

 

(168)

 

52

 

(97)

 

168

Net Loss

(14,981)

(14,022)

(31,370)

(23,864)

Unrealized loss on marketable securities

(60)

(60)

Comprehensive loss

$

(15,041)

$

(14,022)

$

(31,430)

$

(23,864)

Per share information:

 

  

 

  

 

  

 

  

Net loss per share of common stock, basic and diluted

$

(0.09)

$

(0.09)

$

(0.19)

$

(0.15)

Weighted average common shares outstanding, basic and diluted

 

165,527,087

 

163,370,485

165,523,567

 

161,936,680

See accompanying notes to consolidated financial statements.

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TREVENA, INC.

Consolidated Statements of Stockholders’ Equity (Unaudited)
(in thousands, except share data)

Stockholders' Equity

Accumulated

Common Stock

Other

Number

$0.001

Additional

Comprehensive

Total

of

Par

Paid-in

Subscription

Accumulated

Income

Stockholders'

    

Shares

    

Value

    

Capital

    

Receivable

    

Deficit

    

(Loss)

    

Equity

Balance, January 1, 2022

 

165,520,007

$

165

$

558,566

$

$

(494,102)

$

$

64,629

Stock-based compensation expense

 

1,155

 

1,155

Net loss

 

(16,389)

 

(16,389)

Balance, March 31, 2022

 

165,520,007

$

165

$

559,721

$

$

(510,491)

$

$

49,395

Stock-based compensation expense

 

1,008

 

1,008

Issuance of common stock warrants in connection with loan payable

603

603

Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes

 

161,078

(23)

 

(23)

Unrealized loss on marketable securities

 

(60)

 

(60)

Net loss

 

(14,981)

 

(14,981)

Balance, June 30, 2022

 

165,681,085

$

165

$

561,332

$

(23)

$

(525,472)

$

(60)

$

35,942

Stockholders' Equity

Common Stock

Number

$0.001

Additional

Total

of

Par

Paid-in

Accumulated

Stockholders'

    

Shares

    

Value

    

Capital

    

Deficit

    

Equity

    

Balance, January 1, 2021

 

159,999,917

$

160

$

546,422

$

(442,514)

$

104,068

Stock-based compensation expense

 

1,111

1,111

Exercise of stock options

 

5,000

9

9

Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes

 

49,720

(69)

(69)

Issuance of common stock, net of issuance costs

 

1,219,023

1

2,791

2,792

Net loss

 

(9,842)

(9,842)

Balance, March 31, 2021

 

161,273,660

$

161

$

550,264

$

(452,356)

$

98,069

Stock-based compensation expense

 

1,182

1,182

Exercise of stock options

 

132,184

1

170

171

Issuance of common stock, net of issuance costs

 

3,058,879

3

5,153

5,156

Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes

 

44,115

(48)

(48)

Net loss

 

(14,022)

(14,022)

Balance, June 30, 2021

 

164,508,838

$

165

$

556,721

$

(466,378)

$

90,508

See accompanying notes to consolidated financial statements.

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TREVENA, INC.

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

Six Months Ended

June 30, 

    

2022

    

2021

Operating activities:

Net loss

$

(31,370)

$

(23,864)

Adjustments to reconcile net loss to net cash used in operating activities:

 

  

 

Depreciation

 

210

 

214

Stock-based compensation

 

2,163

 

2,293

Noncash interest expense on loan

 

101

 

Revaluation of warrant liability

 

 

(5)

Accretion of bond discount on marketable securities

 

(18)

 

Change in right-of-use asset

232

198

Changes in operating assets and liabilities:

 

 

Accounts receivable, prepaid expenses and other assets

 

(282)

 

(2,280)

Inventories

(638)

(1,045)

Operating lease liabilities

(380)

(334)

Accounts payable, accrued expenses and other liabilities

 

(225)

 

(1,635)

Net cash used in operating activities

 

(30,207)

 

(26,458)

Investing activities:

 

  

 

  

Purchases of marketable securities

 

(29,976)

 

Net cash used in investing activities

 

(29,976)

 

Financing activities:

 

  

 

  

Proceeds from exercise of common stock options

 

 

180

Proceeds from issuance of common stock, net

 

 

7,948

Payment of employee withholding taxes on vested restricted stock units

(117)

Finance lease payments

 

(3)

 

(4)

Change in equity receivable

 

(23)

 

Proceeds from loan payable and issuance of common stock warrants, net of costs

14,475

Net cash provided by financing activities

 

14,449

 

8,007

Net decrease in cash, cash equivalents and restricted cash

 

(45,734)

 

(18,451)

Cash, cash equivalents and restricted cash—beginning of period

 

68,234

 

110,713

Cash, cash equivalents and restricted cash—end of period

$

22,500

$

92,262

Supplemental disclosure of cash flow information:

 

  

 

  

Allocation of loan payable proceeds to common stock warrants

$

603

$

Costs associated with loan payable within accrued expenses

$

501

$

See accompanying notes to consolidated financial statements.

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TREVENA, INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2022

1. Organization and Description of the Business

Trevena, Inc., or the Company, was incorporated in Delaware as Parallax Therapeutics, Inc. on November 9, 2007. The Company began operations in December 2007, and its name was changed to Trevena, Inc. on January 3, 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 one segment and has its principal office in Chesterbrook, Pennsylvania.

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 FDA approved the NDA for OLINVYK and 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, 2022, the Company had an accumulated deficit of $525.5 million. The Company’s net loss was $31.4 million and $23.9 million for the six months ended June 30, 2022 and 2021, respectively. The Company follows the provisions of Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 205-40, Presentation of Financial Statements—Going Concern, or ASC 205-40, which requires management to assess the Company’s ability to continue as a going concern for one year after the date the financial statements are issued. The Company expects that its existing balance of cash and cash equivalents as of June 30, 2022 is sufficient to fund operations to mid-2023, but not for more than one year after the date of this filing and therefore management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s plans to mitigate this risk include raising additional capital through equity or debt financings, or through strategic transactions. Management’s plans may also include the deferral of certain operating expenses unless and until additional capital is received. However, there can be no assurance that the Company will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to the Company, or that the Company will be successful in deferring certain operating expenses, or that the COVID-19 pandemic will not have an impact on the Company’s ability to raise capital or fund its operations as planned. If the Company is unable to raise sufficient additional capital or defer sufficient operating expenses, the Company may be compelled to reduce the scope of its operations and planned capital expenditures.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or U.S. 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 Updates, or ASUs, of the FASB. The Company’s functional currency is the U.S. dollar.

The consolidated financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of the Company’s consolidated balance sheets as of June 30, 2022, its results of operations and its comprehensive loss for the three and six months ended June 30, 2022 and 2021, its consolidated statements of stockholders’ equity for the period from January 1, 2022 to June 30, 2022 and for the period January 1, 2021 to June 30, 2021, and its consolidated statements of cash flows for the six months ended June 30, 2022 and 2021. 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, 2021. 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, 2022 and 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2022, any other interim periods, or any future year or period.

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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. 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 highly uncertain, including vaccine adoption and effectiveness, the impact of emerging variants of the novel coronavirus, and the actions taken to contain or treat COVID-19.

Principles of Consolidation

In connection with the royalty-based financing agreement disclosed in Note 5, the Company established three wholly owned subsidiaries, Trevena Royalty Corporation, Trevena SPV1 LLC and Trevena SPV2 LLC to facilitate the financing. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries as of June 30, 2022. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated 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, restricted cash, accounts payable, and accrued expenses approximate their fair values, given their short-term nature. Additionally, at June 30, 2022, the Company believes the carrying value of the loan payable approximated its fair value as the interest rate is reflective of the rate the Company could obtain on debt with similar terms and conditions.

Recently Adopted Accounting Standards

In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20), to address the complexity associated with applying GAAP to certain financial instruments with characteristics of liabilities and equity, which the Company adopted on January 1, 2022. ASU 2020-06 eliminated the beneficial conversion (and cash conversion) accounting models in ASC 470-20 that require separate accounting for embedded conversion features, and simplified the settlement assessment to determine whether it qualifies for equity classification. In addition, the new guidance requires entities to use the if-converted method to calculate earnings per share for all convertible instruments and to include the effect of share settlement for instruments that may be settled in cash or shares. The Company adopted ASU 2020-06 using the modified retrospective approach and applied the guidance to all financial instruments that were outstanding as of the beginning of 2022. As the Company had not previously separated any financial instruments under the beneficial conversion or cash conversion accounting models, there was no cumulative effect adjustment to the opening balance of retained earnings as a result of adopting ASU 2020-06.

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

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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.

Cash, Cash Equivalents, Restricted Cash and Marketable Securities

The following table presents fair value of the Company’s cash, cash equivalents, and marketable securities as of June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022

    

Adjusted 

Unrealized

Unrealized

Cash and Cash

Restricted

Marketable

Cost

    

Gains

    

Losses

    

Fair Value

    

Equivalents

    

Cash

    

Securities

Cash

$

9,166

$

$

$

9,166

$

6,255

$

2,911

$

Level 1 (1):

 

 

  

 

  

 

  

 

 

  

 

  

Money market funds

 

10,335

 

 

 

10,335

 

10,335

 

 

U.S. treasury securities

 

32,994

 

 

(60)

 

32,934

 

3,000

 

 

29,934

Subtotal

 

43,329

 

 

(60)

 

43,269

 

13,335

 

 

29,934

Total

$

52,495

$

$

(60)

$

52,435

$

19,590

$

2,911

$

29,934

December 31, 2021

Adjusted 

Unrealized

Unrealized

Cash and Cash

Restricted

    

Cost

    

Gains

    

Losses

    

Fair Value

    

Equivalents

    

Cash

Cash

$

9,459

$

$

$

9,459

$

8,148

$

1,311

Level 1 (1):

 

  

 

  

 

  

 

  

 

  

 

  

Money market funds

 

58,775

 

 

 

58,775

 

58,775

 

Subtotal

 

58,775

 

 

 

58,775

 

58,775

 

Total

$

68,234

$

$

$

68,234

$

66,923

$

1,311

(1)The fair value of Level 1 securities is estimated based on quoted prices in active markets for identical assets or liabilities.

The Company maintains $0.9 million as collateral under a letter of credit for the Company’s facility lease obligations in Chesterbrook, Pennsylvania. The Company has recorded this deposit and accumulated interest thereon as restricted cash on its consolidated balance sheet.

In April 2022, the Company placed $2.0 million into an interest reserve account in connection with the royalty-based loan agreement (the “Loan Agreement”) with R-Bridge Investment Four Pte. Ltd. (“R-Bridge”). Payments of interest under the Loan Agreement are made quarterly from certain royalties on the Company’s net sales of OLINVYK in the United States and proceeds from royalties from the Company’s license agreement with Jiangsu Nhwa Pharmaceuticals Co. Ltd., or Nhwa. On each interest payment date, if the royalty payments received do not equal the total interest due for the respective quarter, the interest payment due will be paid from the interest reserve account. This interest reserve account is classified as restricted cash in the Company’s consolidated balance sheet at June 30, 2022.

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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, 2022, or the year ended December 31, 2021.

4. Inventories

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.

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.

Inventory consists of the following (in thousands):

    

June 30, 2022

    

December 31, 2021

Finished goods

$

2,990

$

2,488

The Company had no reserve as of June 30, 2022 and an inventory reserve of $0.1 million as of December 31, 2021.

5. Loan Payable

In April 2022, the Company, through its wholly-owned subsidiary Trevena SPV2 LLC, entered into the Loan Agreement with R-Bridge, pursuant to which the Company may be eligible to receive $40.0 million in term loan borrowings, or the R-Bridge Financing. Term loan borrowings will be advanced in three tranches. The first tranche of $15.0 million was advanced in April 2022. The second tranche of $10.0 million will become available upon achievement of either a commercial or financing milestone as set forth in the Loan Agreement. The third tranche of $15.0 million will become available upon the first commercial sale of OLINVYK in China.

The following table summarizes the impact of the Loan Agreement on the Company’s consolidated balance sheet as follows (in thousands):

    

June 30, 

2022

Gross proceeds

$

15,000

Unamortized debt discount

 

(1,528)

Loan payable, net

$

13,472

The term loans bear interest at a rate per annum equal to 7.00% and will mature on the earlier of (i) the fifteen (15) year anniversary of the closing date in March 2022 and (ii) the date on which the license agreement with Nhwa expires. Repayment of any borrowings and related interest will be made quarterly beginning June 30, 2022. Repayment will be in the form of (i) a 4.0% royalty payment on the Company’s net sales of OLINVYK in the United States and (ii) proceeds from royalties from the Company’s license agreement with Nhwa. In the event Nhwa obtains Chinese approval of OLINVYK by December 31, 2023, royalties from net sales of OLINVYK in the United States will be capped at $10.0 million. In the event Chinese approval does not occur by December 31, 2023, the royalties from net sales in the United States will increase to 7.0% and will continue until certain combined totals from license agreement with Nhwa and royalties from net sales of OLINVYK are paid. Upon a change in control or in the event the Company elects to repay any outstanding borrowings prior to their contractual maturity, the Company is required to pay a control premium

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ranging from 125% to 150% of the outstanding principal and interest at the time of repayment and in the event the Company has not obtained approval for OLINVYK in China. In the event the Company obtains approval for OLINVYK in China, the premium, if triggered, would be equal to the greater of (i) principal and interest and (ii) $10.0 million or $20.0 million depending on the timing in which the triggering event occurs.

In April 2022, the Company placed $2.0 million into an interest reserve account in connection with the Loan Agreement. Payments of interest under the Loan Agreement are made quarterly from the royalty on the Company’s net sales of OLINVYK in the United States and proceeds from royalties from the Company’s license agreement with Nhwa. On each interest payment date, if the royalty payments received do not equal the total interest due for the respective quarter, the interest payment due will be paid from the interest reserve account. This interest reserve account is classified as restricted cash in the Company’s consolidated balance sheet at June 30, 2022.

Repayments of all borrowings, interest and other related payments, under the Loan Agreement are guaranteed by the Company and secured by substantially all of the assets associated with the license agreement with Nhwa, the Chinese intellectual property related to OLINVYK, and deposit accounts established to hold amounts received on account for repayment of the borrowings and related interest under the Loan Agreement. The Loan Agreement contains certain customary affirmative and negative covenants and contains customary defined events of default, upon which any outstanding principal and unpaid interest shall be due on demand. At June 30, 2022, there were no events of default pursuant to the Loan Agreement and the Company was in compliance with all covenants.

In connection with the first tranche borrowings in April 2022, the Company issued a warrant to R-Bridge to purchase 5,000,000 shares of the Company’s common stock at an initial exercise price of $0.82 per share and will be exercisable for a period of three years. The Company concluded the warrant was a freestanding equity-classified instrument to which the proceeds from the first tranche was allocated across the debt and warrant on a relative fair value basis. In addition, the Company incurred lender fees and third-party costs of $0.5 million each and were netted against the proceeds allocated to the debt and warrant. Fees netted against debt proceeds represent a debt discount and are amortized into interest expense using the effective interest method. During the three and six months ended June 30, 2022, the Company recognized interest expense of $0.3 million of which $0.1 million pertained to the amortization of the debt discount.

The accounting for the Loan Agreement requires the Company to make certain estimates and assumptions, particularly about future royalties under the license agreement with Nhwa and sales of OLINVYK in the United States and China. Such estimates and assumptions are utilized in determining the expected repayment term, amortization period of the debt discount, accretion of interest expense and classification between current and long-term portions of amounts outstanding. The Company amortizes the debt discount into interest expense over the expected term of the arrangement using the interest method based on projected cash flows. Similarly, the Company classifies as current debt for the Loan Agreement, amounts that are expected to be repaid during the succeeding twelve months after the reporting period end. However, the repayment of amounts due under the Loan Agreement is variable because the cash flows to be utilized for periodic payments is a function of amounts received by the Company with respect to the royalties and net product sales. Accordingly, the estimates of the magnitude and timing of amounts to be available for debt service are subject to significant variability and thus, subject to significant uncertainty. Therefore, these estimates and assumptions are likely to change, which may result in future adjustments to the portion of the debt that is classified as a current liability, the amortization of debt discount and the accretion of interest expense. Other amounts that may become due and payable under the Loan Agreement, including amounts shared between the parties with respect to cash flows received in excess of pre-defined thresholds, are recognized as additional interest expense when they become probable and estimable. The amount of principal to be repaid in each of the five succeeding years is not fixed and determinable.

6. Stockholders’ Equity

Equity Offerings

Under its certificate of incorporation, the Company was authorized to issue up to 200,000,000 shares of common stock as of June 30, 2022. The Company also was authorized to issue up to 5,000,000 shares of preferred stock as of June 30, 2022. The Company is required, at all times, to reserve and keep available out of its authorized but unissued shares of common stock sufficient shares to effect the conversion of the shares of the preferred stock and all outstanding stock options and warrants.

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R-Bridge Financing

In connection with the R-Bridge Financing, the Company issued a warrant to purchase 5,000,000 shares of common stock. This warrant has a term of 3 years, is immediately exercisable and has an exercise price of $0.82 per share. It was issued in April 2022 upon receipt of the first $15.0 million tranche.

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 $50.0 million, or the HCW ATM Program. Sales of the shares of common stock are deemed to be “at-the-market offerings,” as defined in Rule 415 under the Securities Act. In December 2020, the Company and Wainwright entered into Amendment No. 1 to Common Stock Sales Agreement, or the Amendment, to amend the Common Stock Sales Agreement to, among other things, update the reference to the registration statement pursuant to which the shares of common stock may be sold and to include an additional $50.0 million of shares of common stock in the HCW ATM Program. There were no sales under the HCW ATM Program during the six months ended June 30, 2022. As of June 30, 2022, there was approximately $41.9 million remaining available for future issuances under the HCW ATM Program.

Registered Direct Offering and Concurrent Warrant Issuance

In connection with the Company’s January 2019 securities purchase agreements, the Company issued warrants to purchase 500,000 shares of common stock to certain designees of H.C. Wainwright & Co., LLC. These warrants have a term of five years, are immediately exercisable and have an exercise price of $1.25 per share. As of June 30, 2022, 172,500 of these warrants remain outstanding.

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 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, nonqualified 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 500,000 shares of the Company’s common stock for issuance under the Inducement Plan. The Inducement Plan provides for nonqualified stock options and restricted stock unit awards. The only persons eligible to receive grants of awards under the Inducement Plan are individuals who satisfy the standards for inducement grants under Nasdaq Marketplace Rule 5635(c)(4) and the related guidance under Nasdaq IM 5635-1, including individuals who were not previously an employee or director of the Company or are following a bona fide period of non-employment, in each case as an inducement material to such individual’s agreement to enter into employment with the Company.

Under all of the Company’s equity incentive 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 10 years, and options are exercisable in cash or as otherwise determined by the board of directors or its designee. Vesting generally occurs over a period of not greater than four years. For performance-based stock awards, the Company recognizes expense when achievement of the performance condition is probable, over the requisite service period.

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The estimated grant date fair value of the Company’s share-based awards is amortized on a straight-line basis over the awards’ service periods. Share based compensation expense recognized was as follows (in thousands):

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

    

2021

    

2022

    

2021

    

Research and development

$

219

$

248

$

494

$

508

Selling, general and administrative

 

782

 

925

 

1,655

 

1,765

Cost of goods sold

7

9

14

20

Total stock-based compensation

$

1,008

$

1,182

$

2,163

$

2,293

Stock Options

A summary of stock option activity and related information through June 30, 2022 follows:

Options Outstanding

    

    

    

Weighted 

Average 

Weighted 

Remaining 

Average 

Contractual 

Number of 

Exercise 

Term 

Shares

Price

(in years)

Balance, December 31, 2021

 

12,449,870

$

2.67

 

7.11

Granted

 

944,950

 

0.48

Exercised

 

 

Forfeited/Cancelled

 

(435,809)

 

1.85

Balance, June 30, 2022

 

12,959,011

$

2.53

 

6.12

Vested or expected to vest at June 30, 2022

 

12,959,011

$

2.53

 

6.12

Exercisable at June 30, 2022

 

8,274,424

$

3.15

 

4.51

The aggregate intrinsic value of options exercisable as of June 30, 2022 was zero, based on the difference between the Company’s closing stock price of $0.41 and the exercise price of each stock option. At June 30, 2022, there was $5.1 million of total unrecognized compensation expense related to unvested options that will be recognized over the weighted average remaining vesting period of 2.58 years.

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, 2022 and 2021 was estimated at $0.37 and $1.48 per share, respectively, on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

June 30, 

    

2022

    

2021

    

    

Expected term of options (in years)

 

5.7

 

6.1

 

 

Risk-free interest rate

 

2.7

%  

0.9

%  

 

Expected volatility

 

97.8

%  

97.7

%  

 

Dividend yield

 

%  

%  

 

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.

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Table of Contents

The following is a summary of changes in the status of non-vested RSUs during the six months ended June 30, 2022:

    

    

Weighted 

Average 

Number of 

Grant Date

Awards

Fair Value

Non-vested at December 31, 2021

 

5,918,496

$

1.08

Granted

 

Vested

 

(161,078)

0.80

Forfeited

 

(447,474)

1.36

Non-vested at June 30, 2022

 

5,309,944

$

1.06

For the three and six months ended June 30, 2022, the Company recorded $0.4 million and $0.9 million, respectively, in stock-based compensation expense related to RSUs, which is reflected in the consolidated statements of operations and comprehensive loss.

As of June 30, 2022, there was $4.7 million of total unrecognized compensation expense related to unvested RSUs that will be recognized over the weighted average remaining period of 2.92 years.

Shares Available for Future Grant

At June 30, 2022, the Company has the following shares available to be granted under its equity incentive plans:

    

    

Inducement 

2013 Plan

Plan

Available at December 31, 2021

 

4,178,805

 

252,500

Authorized

 

6,620,800

Granted

 

(944,950)

Forfeited/Cancelled

 

475,345

Available at June 30, 2022

 

10,330,000

 

252,500

Shares Reserved for Future Issuance

At June 30, 2022, the Company has reserved the following shares of common stock for issuance:

Stock options outstanding under 2013 Plan

    

12,711,511

Restricted stock units outstanding under 2013 Plan

5,309,944

Stock options outstanding under Inducement Plan

 

247,500

Shares reserved for future issuance under Inducement Plan

 

252,500

Shares reserved for future issuance under 2013 Employee Stock Purchase Plan

 

225,806

Warrants outstanding

 

5,275,430

Total shares of common stock reserved for future issuance

 

24,022,691

7. 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 8,231 square feet of developed office space on the first floor and 40,565 square feet of developed office space on the second floor. The lease term for this space extends through May 2028. On October 11, 2018, the Company entered into an agreement with The Vanguard Group, Inc., or Vanguard, whereby Vanguard agreed to sublease the 40,565 square feet of space on the second floor for an initial term of 37 months. On October 2, 2020, Vanguard notified the Company that they exercised the first option to extend the sublease term for three years through November 30, 2024.

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Table of Contents

Vanguard has a second option to extend the sublease term for an additional three years through November 30, 2027. The sublease provides for rent abatement for the first month of the term; thereafter, the rent payable to the Company by Vanguard under the sublease is (i) $0.50 less during months 2 through 13 of the sublease and (ii) in month 14 and thereafter of the sublease, $1.00 less than the base rent payable by the Company under its master lease with Chesterbrook Partners, L.P. Vanguard also is responsible for paying to the Company all tenant energy costs, annual operating costs, and annual tax costs attributable to the subleased space during the term of the sublease. Rent expense and associated sublease income are recorded in the Company’s consolidated statements of operations and comprehensive loss as other income (expense).

Supplemental balance sheet information related to leases was as follows (in thousands):

    

June 30, 2022

    

December 31, 2021

Operating leases:

 

  

 

  

Operating lease right-of-use assets

 

$

4,474

 

$

4,706

Other current lease liabilities

838

788

Operating lease liabilities

5,879

6,309

Total operating lease liabilities

$

6,717

$

7,097

Finance leases:

Property and equipment, at cost

$

45

$

45

Accumulated depreciation

(44)

(41)

Property and equipment, net

1

4

Other current lease liabilities

1

4

Other long-term liabilities

Total finance lease liabilities

$

1

$

4

The components of lease expense were as follows (in thousands):

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

Operating lease costs:

Operating lease rental expense

$

336

$

311

$

663

$