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 September 30, 2022

☐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: (610) 354-8840

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 November 7, 2022: 173,686,168

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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	5
	Notes to Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	28
	PART II- OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31

SIGNATURES		32

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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 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

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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.

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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)


	September 30, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	22,431	$	66,923
Marketable securities		17,961		—
Inventories		785		2,352
Prepaid expenses and other current assets		1,363		1,448
Total current assets		42,540		70,723
Restricted cash		2,557		1,311
Property and equipment, net		1,570		1,841
Right-of-use lease asset		4,352		4,706
Other assets		—		1,543
Total assets	$	51,019	$	80,124
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable, net	$	1,416	$	4,547
Accrued expenses and other current liabilities		6,794		3,847
Current portion of loans payable, net		174		—
Lease liability		873		792
Total current liabilities		9,257		9,186
Loan payable, net		13,359		—
Leases, net of current portion		5,672		6,309
Warrant liability		868		—
Total liabilities		29,156		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 September 30, 2022 and December 31, 2021		—		—
Common stock—$0.001 par value; 200,000,000 shares authorized at September 30, 2022 and December 31, 2021; 173,686,168 and 165,520,007 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		173		165
Additional paid-in capital		562,485		558,566
Accumulated deficit		(540,767)		(494,102)
Accumulated other comprehensive loss		(28)		—
Total stockholders’ equity		21,863		64,629
Total liabilities and stockholders’ equity	$	51,019	$	80,124

See accompanying notes to consolidated financial statements.

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TREVENA, INC.

Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

(in thousands, except share and per share data)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Revenue:
Product revenue	$	(438)	$	112	$	(438)	$	499
License revenue		—		69		20		69
Total revenue		(438)		181		(418)		568
Operating expenses:
Cost of goods sold		2,368		199		2,791		620
Selling, general and administrative		7,683		10,438		29,003		28,351
Research and development		5,266		3,404		14,816		9,489
Total operating expenses		15,317		14,041		46,610		38,460
Loss from operations		(15,755)		(13,860)		(47,028)		(37,892)
Other income (expense):
Change in fair value of warrant liability		651		1		651		6
Other income, net		65		51		174		127
Interest income		127		39		246		130
Interest expense		(401)		—		(726)		—
Loss on foreign currency exchange		18		(2)		18		(6)
Total other income (expense), net		460		89		363		257
Net Loss		(15,295)		(13,771)		(46,665)		(37,635)
Unrealized gain (loss) on marketable securities		32		—		(28)		—
Comprehensive loss	$	(15,263)	$	(13,771)	$	(46,693)	$	(37,635)
Per share information:
Net loss per share of common stock, basic and diluted	$	(0.09)	$	(0.08)	$	(0.28)	$	(0.23)
Weighted average common shares outstanding, basic and diluted		170,725,392		164,510,570		167,276,563		162,811,136

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			Preferred Stock									Other
	Number	$0.001		Number			Additional						Comprehensive			Total
	of	Par		of		Value	Paid-in		Subscription		Accumulated		Income			Stockholders'
	Shares	Value		Shares			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	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
Stock-based compensation expense	—		—	—		—		764		—		—		—			764
Issuance of Preferred Stock	—		—	2,000		397		—		—		—		—			397
Conversion of Preferred Stock to Common Stock	8,000,000		8	(2,000)		(397)		389		—		—		—			—
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes	5,083		—	—		—		—		23		—		—			23
Unrealized loss on marketable securities	—		—	—		—		—		—		—		32			32
Net loss	—			—		—		—		—		(15,295)		—			(15,295)
Balance, September 30, 2022	173,686,168	$	173	—	$	—	$	562,485	$	—	$	(540,767)	$	(28)	$	$	21,863

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	Stockholders' Equity
													Accumulated
	Common Stock			Preferred Stock									Other
	Number	$0.001		Number			Additional						Comprehensive			Total
	of	Par		of		Value	Paid-in		Subscription		Accumulated		Income		Stockholders'
	Shares	Value		Shares			Capital		Receivable		Deficit		(Loss)		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
Unrealized gain on marketable securities	—		—	—		—		—		—		—		—		—
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)
Unrealized gain on marketable securities	—		—	—		—		—				—		—		—
Net loss	—		—	—		—		—		—		(14,022)		—		(14,022)
Balance, June 30, 2021	164,508,838	$	165	—	$	—	$	556,721	$	—	$	(466,378)	$	—	$	90,508
Stock-based compensation expense	—		—	—		—		978		—		—		—		978
Subscription receivable	9,375		—	—		—		—		—		—		—		—
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes	—		—	—		—		8		(8)		—		—		—
Issuance of common stock, net of issuance costs	—		—	—		—		—				—		—		—
Net exercise of common stock warrant	—		—	—		—		—		—		—		—		—
Net loss	—		—	—		—		—		—		(13,771)		—		(13,771)
Balance, September 30, 2021	164,518,213	$	165	—	$	—	$	557,707		(8)	$	(480,149)	$	—	$	77,715

See accompanying notes to consolidated financial statements.

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TREVENA, INC.

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


	Nine Months Ended
	September 30,
	2022		2021
Operating activities:
Net loss	$	(46,665)	$	(37,635)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		300		322
Stock-based compensation		2,927		3,271
Noncash interest expense on loan		230		—
Inventory valuation adjustment		2,070		—
Revaluation of warrant liability		(651)		(6)
Returns reserve adjustment		383		—
Accretion of bond discount on marketable securities		(36)		—
Change in right-of-use asset		354		304
Changes in operating assets and liabilities:
Accounts receivable, prepaid expenses and other assets		1,628		(1,801)
Inventories		(503)		(1,310)
Insurance recovery		—		9,000
Settlement liability		—		(9,000)
Operating lease liabilities		(552)		(512)
Accounts payable, accrued expenses and other liabilities		(298)		(214)
Net cash used in operating activities		(40,813)		(37,581)
Investing activities:
Purchases of property and equipment		(28)		(16)
Maturities of marketable securities		15,000		—
Long term deposits		—		(1,164)
Purchases of marketable securities		(32,954)		—
Net cash used in investing activities		(17,982)		(1,180)
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		(4)		(6)
Proceeds from debt		13,906		—
Proceeds from issuance of convertible Series A and Series B preferred stock and warrants, net of issuance costs		1,647		—
Net cash provided by financing activities		15,549		8,005
Net decrease in cash, cash equivalents and restricted cash		(43,246)		(30,756)
Cash, cash equivalents and restricted cash—beginning of period		68,234		110,713
Cash, cash equivalents and restricted cash—end of period	$	24,988	$	79,957
Supplemental disclosure of cash flow information:
Cash paid for interest	$	268	$	—
Subscription receivable on exercise of options	$	—	$	8
Allocation of loan payable proceeds to common stock warrants	$	603	$	—
Preferred stock proceeds allocated to warrant liability	$	(603)	$	—
Conversion of Series A and Series B preferred stock to common stock	$	(396)	$	—

See accompanying notes to consolidated financial statements.

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TREVENA, INC.

Notes to Unaudited Consolidated Financial Statements

September 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 September 30, 2022, the Company had an accumulated deficit of $540.8 million. The Company’s net loss was $46.7 million and $37.6 million for the nine months ended September 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 September 30, 2022 is sufficient to fund operations into the third quarter of 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 September 30, 2022, its results of operations and its comprehensive loss for the three and nine months ended September 30, 2022 and 2021, its consolidated statements of stockholders’ equity for the period from January 1, 2022 to September 30, 2022 and for the period January 1, 2021 to September 30, 2021, and its consolidated statements of cash flows for the nine months ended September 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 nine months ended September 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 September 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, marketable securities, restricted cash, accounts payable, and accrued expenses approximate their fair values, given their short-term nature. Additionally, at September 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.

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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.

Cash, Cash Equivalents, Marketable Securities, and Restricted Cash

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


	September 30, 2022
	Adjusted		Unrealized		Unrealized				Cash and Cash		Restricted		Marketable
	Cost		Gains		Losses		Fair Value		Equivalents		Cash		Securities
Cash	$	17,584	$	—	$	—	$	17,584	$	15,027	$	2,557	$	—
Level 1 (1):
Money market funds		3,424		—		—		3,424		3,424		—		—
U.S. treasury securities		21,970		—		(28)		21,942		3,980		—		17,961
Subtotal		25,394		—		(28)		25,366		7,404		—		17,961
Total	$	42,978	$	—	$	(28)	$	42,950	$	22,431	$	2,557	$	17,961


	December 31, 2021
	Adjusted		Unrealized		Unrealized				Cash and Cash		Restricted		Marketable
	Cost		Gains		Losses		Fair Value		Equivalents		Cash		Securities
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 $0.5 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

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interest reserve account is classified as restricted cash in the Company’s consolidated balance sheet at September 30, 2022.

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 nine months ended September 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):


	September 30, 2022		December 31, 2021
Finished goods	$	2,990	$	2,488
Inventory Valuation Adjustment		(2,205)		(136)
Total Inventories	$	785	$	2,352

The Company recorded an inventory valuation adjustment of $2.2 million during the quarter ended September 30, 2022 and an inventory valuation adjustment of $0.1 million during the year ended December 31, 2021. The valuation adjustments were recorded to account for slow moving or obsolete inventory due to uncertainty of commercial activities and future expected OLINVYK sales.

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 up to $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):