10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on May 15, 2024
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
Trevena, Inc.
(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 May 13, 2024: |
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,” including those that are incorporated by reference into this Quarterly Report from our most recent Annual Report on Form 10-K, or the “Annual Report.” 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 plans and expectations regarding our strategic alternative review process and the timing and success of such process regarding a potential transaction; |
● | success in retaining, or changes required in, our officers, key employees or directors; |
● | our sales of OLINVYK and our ability to successfully commercialize 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 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 |
ii
● | our ability to satisfy and maintain 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.
iii
PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
TREVENA, INC.
Consolidated Balance Sheets (Unaudited)
(in thousands, except share and per share data)
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March 31, 2024 |
December 31, 2023 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ |
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$ |
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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 assets |
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Total assets |
$ |
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$ |
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Liabilities and stockholders’ deficit |
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Current liabilities: |
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Accounts payable, net |
$ |
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$ |
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Accrued expenses and other current liabilities |
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Lease liabilities |
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Total current liabilities |
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Loan payable, net |
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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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Stockholders’ deficit: |
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Preferred stock—$ |
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Common stock—$ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Total stockholders’ deficit |
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( |
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( |
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Total liabilities and stockholders’ deficit |
$ |
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$ |
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See accompanying notes to consolidated financial statements.
1
TREVENA, INC.
Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
(in thousands, except share and per share data)
Three Months Ended |
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March 31, |
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2024 |
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2023 |
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Revenue: |
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Product revenue |
$ |
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$ |
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Total revenue |
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Operating expenses: |
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Cost of goods sold |
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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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( |
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( |
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Other income (expense): |
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Change in fair value of warrant liability |
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Other income (expense), net |
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Interest income |
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Interest expense |
( |
( |
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Loss on foreign currency exchange |
( |
( |
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Total other income, net |
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Net loss |
( |
( |
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Unrealized gain on marketable securities |
— |
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Comprehensive loss |
$ |
( |
$ |
( |
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Per share information: |
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Net loss per share of common stock, basic and diluted |
$ |
( |
$ |
( |
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Weighted average common shares outstanding, basic and diluted |
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See accompanying notes to consolidated financial statements.
2
TREVENA, INC.
Consolidated Statements of Stockholders’ (Deficit) Equity (Unaudited)
(in thousands, except share data)
Stockholders' (Deficit) Equity |
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Accumulated |
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Common Stock |
Other |
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Number |
$ |
Additional |
Comprehensive |
Total |
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of |
Par |
Paid-in |
Accumulated |
Income |
Stockholders' |
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Shares |
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Value |
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Capital |
Deficit |
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(Loss) |
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(Deficit) Equity |
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Balance, January 1, 2024 |
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$ |
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$ |
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$ |
( |
$ |
— |
$ |
( |
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Stock-based compensation expense |
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— |
— |
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— |
— |
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Exercise of pre-funded warrant |
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( |
— |
— |
— |
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Net loss |
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— |
— |
— |
( |
— |
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( |
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Balance, March 31, 2024 |
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$ |
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$ |
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$ |
( |
$ |
— |
$ |
( |
Balance, January 1, 2023 |
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$ |
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$ |
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$ |
( |
$ |
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$ |
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Stock-based compensation expense |
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— |
— |
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— |
— |
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Unrealized loss on marketable securities |
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— |
— |
— |
— |
( |
( |
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Exercise of pre-funded warrants and related reclassification of warrant liability |
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— |
— |
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Net loss |
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— |
— |
— |
( |
— |
( |
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Balance, March 31, 2023 |
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$ |
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$ |
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$ |
( |
$ |
— |
$ |
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See accompanying notes to consolidated financial statements.
3
TREVENA, INC.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Three Months Ended |
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March 31, |
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2024 |
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2023 |
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Operating activities: |
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Net loss |
$ |
( |
$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation |
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Stock-based compensation |
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Noncash interest expense on loan |
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Change in fair value of warrant liability |
( |
( |
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Change in right-of-use asset |
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Changes in operating assets and liabilities: |
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Accounts receivable, prepaid expenses and other assets |
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( |
( |
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Operating lease liabilities |
( |
( |
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Accounts payable, accrued expenses and other liabilities |
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( |
( |
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Net cash used in operating activities |
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( |
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( |
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Financing activities: |
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Finance lease payments |
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( |
( |
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Proceeds from exercise of pre-funded warrants |
— |
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Net cash used in financing activities |
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( |
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( |
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Net decrease in cash, cash equivalents and restricted cash |
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( |
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( |
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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 |
$ |
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$ |
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Supplemental disclosure of cash flow information: |
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Reclassification of warrant liability upon exercise of pre-funded warrants |
$ |
— |
$ |
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See accompanying notes to consolidated financial statements.
4
TREVENA, INC.
Notes to Unaudited Consolidated Financial Statements
March 31, 2024
1. Organization and Description of the Business
Trevena, Inc., or 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 commercialization and research and development, including nonclinical studies and clinical trials. The Company has never been profitable. In late 2017, the Company submitted a new drug application, or NDA, for OLINVYK® (OLINVYK) injection, or OLINVYK, to the United States Food and Drug Administration, or the FDA. In August 2020, the FDA approved the NDA for OLINVYK and the Company initiated commercial launch of OLINVYK in the first quarter of 2021. In April 2024, we announced that OLINVYK remains available for purchase by customers, but that we are reducing commercial support for the product to preserve capital as we conduct a process to explore a range of strategic alternatives for OLINVYK.
Since its inception, the Company has incurred losses and negative cash flows from operations. At March 31, 2024, the Company had an accumulated deficit of $
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 March 31, 2024, its results of operations and its comprehensive loss for the three months ended March 31, 2024 and 2023, its consolidated statements of stockholders’ equity for the period from January 1, 2024 to March 31, 2024 and for the period January 1, 2023 to March 31, 2023, and its consolidated statements of cash flows for the three months ended March 31, 2024 and 2023. 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, 2023. 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 three
5
months ended March 31, 2024 and 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period.
Principles of Consolidation
In connection with the royalty-based financing agreement disclosed in Note 5, the Company established
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 amounts reported in the financial statements and accompanying notes. Management used significant estimates in the following areas, among others: stock-based compensation expense, the determination of the fair value of stock-based awards, the fair value of common stock warrants, the accounting for research and development costs, accrued expenses, the recoverability of the Company’s net deferred tax assets and related valuation allowance, and the amortization of debt expenses. The financial data and other information disclosed in these notes are not necessarily indicative of the results to be expected for any future year or period. The Company bases its estimates on historical experience and also on assumptions that it believes are reasonable, however, actual results could significantly differ from those results.
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, the Company believes the carrying value of the loan payable approximates its fair value as the interest rate is reflective of the rate the Company could obtain on debt with similar terms and conditions. Certain of the Company’s common stock warrants are carried at fair value, as disclosed in Note 3.
The Company has evaluated the estimated fair value of financial instruments using available market information and management’s estimates. The use of different market assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts. See Note 3 for additional information.
Product Revenue
Product revenue is recognized at the point in time when our performance obligations with our customers have been satisfied. At contract inception, we determine if the contract is within the scope of ASC Topic 606 and then evaluate the contract using the following five steps: (i) identify the contract with the customer; (ii) identify the performance obligations; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; and (v) recognize revenue at the point in time when the Company satisfies a performance obligation.
OLINVYK is sold to wholesalers in the US (collectively, “customers”). These customers subsequently resell OLINVYK generally to hospitals, ambulatory surgical centers and other purchasers of OLINVYK. We recognize revenue from OLINVYK sales at the point customers obtain control of the product, which generally occurs upon delivery.
Revenue is recorded at the transaction price, which is the amount of consideration we expect to receive in exchange for transferring products to a customer. We determine the transaction price based on fixed consideration in our contractual agreements, which includes estimates of variable consideration which are more fully described below. The transaction price is allocated entirely to the performance obligation to provide pharmaceutical products. In determining the transaction price, a significant financing component does not exist since the timing from when we deliver product to when the customers pay for the product is less than one year and the customers do not pay for product in advance of the transfer of the product.
6
Variable Consideration
The Company includes an estimate of variable consideration in its transaction price at the time of sale when control of the product transfers to the customer. Variable consideration includes distributor chargebacks, prompt payment (cash) discounts, distribution service fees and product returns.
The Company assesses whether or not an estimate of its variable consideration is constrained and has determined that the constraint does not apply, since it is probable that a significant reversal in the amount of cumulative revenue will not occur in the future when the uncertainty associated with the variable consideration is subsequently resolved. The Company’s estimates for variable consideration are adjusted as required at each reporting period for specific known developments that may result in a change in the amount of total consideration it expects to receive.
Distributor Chargebacks
When a product that is subject to a contractual price agreement is sold to a third party, the difference between the price paid to the Company by the wholesaler and the price under the specific contract is charged back to the Company by the wholesaler. Utilizing this information, the Company estimates a chargeback percentage for each product and records an allowance for chargebacks as a reduction to revenue when the Company records sales of the products. We reduce the chargeback allowance when a chargeback request from a wholesaler is processed. Reserves for distributor chargebacks are included in accounts receivable, net on the consolidated balance sheet.
Prompt Payment (Cash) Discounts
The Company provides customers with prompt payment discounts which may result in adjustments to the price that is invoiced for the product transferred, in the case that payments are made within a defined period. The Company’s prompt payment discount reserves are based on actual net sales and contractual discount rates. Reserves for prompt payment discounts are included in accounts receivable, net on the consolidated balance sheet.
Distribution Service Fees
The Company pays distribution service fees to its customers based on a fixed percentage of the product price. These fees are not in exchange for a distinct good or service and therefore are recognized as a reduction of the transaction price. The Company reserves for these fees based on actual net sales, contractual fee rates negotiated with the customer and the mix of the products in the distribution channel that remain subject to fees. Reserves for distribution service fees are included in accounts receivable, net on the consolidated balance sheet.
Product Returns
Generally, the Company’s customers have the right to return any unopened product during the eighteen (18) month period beginning six (6) months prior to the labeled expiration date and ending twelve (12) months after the labeled expiration date. The Company does not currently rely on industry data in its analysis of returns reserve. As the Company sold OLINVYK and established historical sales over a longer period of time (i.e., two to three years), the Company placed more reliance on historical purchasing, demand and return patterns of its customers when evaluating its reserves for product returns. OLINVYK has a forty-eight (48) month shelf life.
The Company recognizes the amount of expected returns as a refund liability, representing the obligation to return the customer’s consideration. Since the returns primarily consist of expired and short dated products that will not be resold, the Company does not record a return asset for the right to recover the goods returned by the customer at the time of the initial sale (when recognition of revenue is deferred due to the anticipated return). Accrued product return estimates are recorded in accrued expenses and other current liabilities on the consolidated balance sheet.
7
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.
The following table presents fair value of the Company’s cash, cash equivalents, restricted cash and warrant liability as of March 31, 2024 and December 31, 2023 (in thousands):
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March 31, |
Quoted Prices in Active Markets |
Significant Other Observable Inputs |
Unobservable Inputs |
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Description: |
2024 |
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(Level 1) |
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(Level 2) |
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(Level 3) |
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Assets: |
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Cash |
$ |
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$ |
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$ |
— |
$ |
— |
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Money Market Funds |
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— |
— |
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Restricted Cash |
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— |
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— |
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Total assets measured and recorded at fair value |
$ |
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$ |
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$ |
— |
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$ |
— |
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Liabilities: |
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Warrant Liability |
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— |
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— |
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Total liabilities measured and recorded at fair value |
$ |
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$ |
— |
$ |
— |
$ |
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8
December 31, |
Quoted Prices in Active Markets |
Significant Other Observable Inputs |
Unobservable Inputs |
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Description: |
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2023 |
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(Level 1) |
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(Level 2) |
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(Level 3) |
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Assets: |
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Cash |
$ |
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$ |
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$ |
— |
$ |
— |
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Money Market Funds |
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— |
— |
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Restricted Cash |
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— |
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— |
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Total assets measured and recorded at fair value |
$ |
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$ |
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$ |
— |
$ |
— |
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Liabilities: |
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Warrant Liability |
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— |
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— |
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Total liabilities measured and recorded at fair value |
$ |
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$ |
— |
$ |
— |
$ |
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(1) | The fair value of Level 1 securities is estimated based on quoted prices in active markets for identical assets or liabilities. |
The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were
transfers between Level 2 and Level 3 during the three months ended March 31, 2024.December 2023 Equity Offering and Warrant Issuance
The common stock warrants issued in connection with the Company’s private placement and warrant exercise transactions in December 2023 (collectively, the “December 2023 Offering”) were classified as liabilities at the time of issuance due to certain cash settlement adjustment features that were not deemed to be indexed to the Company’s stock. The warrant liability is remeasured each reporting period with the change in fair value recorded to other income (expense) in the consolidated statement of operations and comprehensive loss until the warrants are exercised, expired, reclassified or otherwise settled. The fair value of the warrant liability was determined using Level 3 inputs and was estimated using a Black-Scholes Option Pricing Model.
The assumptions used to estimate the fair value were as follows:
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March 31, 2024 |
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December 31, 2023 |
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Expected term of warrants (in years) |
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Risk-free interest rate |
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% |
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% |
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Expected volatility |
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% |
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% |
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Dividend yield |
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— |
% |
— |
% |
The following is a roll forward of the December 2023 Offering common stock warrant liability (in thousands):
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Warrant Liability |
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Balance, December 31, 2023 |
$ |
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Change in fair value |
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( |
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Balance, March 31, 2024 |
$ |
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9
Warrants
As of March 31, 2024, the Company had the following common stock warrants outstanding:
Classification |
Warrants |
Exercise Price |
Expiration Date |
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December 2023 Offering Pre-Funded Warrants |
Equity |
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$ |
Until exercised |
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December 2023 Offering Warrants |
Liability |
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R-Bridge warrants |
Equity |
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4/14/2025 |
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Other warrants |
Equity |
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9/19/2024 - 3/31/2027 |
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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. 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):
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March 31, 2024 |
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December 31, 2023 |
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Finished goods |
$ |
— |
$ |
|
||
Inventory Valuation Adjustment |
— |
( |
||||
Total Inventories |
$ |
- |
$ |
- |
The Company recorded an inventory valuation adjustment of $
5. Loan Payable
In April 2022, the Company, through its wholly owned subsidiary, Trevena SPV2 LLC (“SPV2”), entered into a royalty-based loan agreement (the “Loan Agreement”) with R-Bridge, pursuant to which the Company may be eligible to receive up to $
The following table summarizes the impact of the Loan Agreement on the Company’s consolidated balance sheet as follows (in thousands):
10
|
March 31, |
||
2024 |
|||
Principal and accreted interest |
$ |
|
|
Unamortized debt discount |
|
( |
|
Loans payable, net |
$ |
|
The term loans bear interest at a rate per annum equal to
In April 2022, the Company placed $
Repayments of all borrowings, interest and other related payments, under the Loan Agreement are 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 March 31, 2024, there were no events of default pursuant to the Loan Agreement and the Company was in compliance with all covenants. Interest expense is imputed based on the estimated loan repayment period, which takes into consideration estimated future revenue in the United States and China. Changes in estimates are recognized prospectively and may have a material impact on liability balance. As of March 31, 2024, the effective interest rate was
In connection with the first tranche borrowings in April 2022, the Company issued a warrant to R-Bridge to purchase
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.
11
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’ (Deficit) Equity
Equity Offerings
Under its certificate of incorporation, the Company was authorized to issue up to
December 2023 Equity Offering and Warrant issuance
On December 28, 2023, the Company and a single investor entered into a securities purchase agreement whereby the Company issued
Concurrent with the securities purchase agreement above, the Company and the investor entered into an inducement agreement whereby the Company agreed to reduce the exercise price of
The Company received $
The warrants issued did not meet the requirements to be indexed to equity and equity classified and, as such, are classified as liabilities at fair value with changes in fair value recorded within other income (expense), net on the consolidated statements of operations and comprehensive loss.
12
Equity Incentive Plan
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 March 31, |
|||||||
|
2024 |
2023 |
|
||||
Research and development |
$ |
|
$ |
|
|||
Selling, general and administrative |
|
|
|
|
|||
Total stock-based compensation |
$ |
|
$ |
|
Stock Options
A summary of stock option activity and related information through March 31, 2024 follows:
Options Outstanding |
|||||||
|
|
|
Weighted |
||||
Average |
|||||||
Weighted |
Remaining |
||||||
Average |
Contractual |
||||||
Number of |
Exercise |
Term |
|||||
Shares |
Price |
(in years) |
|||||
Balance, December 31, 2023 |
|
|
$ |
|
|||
Granted |
|
— |
— |
||||
Exercised |
|
— |
— |
||||
Forfeited/Cancelled |
|
( |
|
||||
Balance, March 31, 2024 |
|
|
$ |
|
|||
Vested or expected to vest at March 31, 2024 |
|
|
$ |
|
|||
Exercisable at March 31, 2024 |
|
|
$ |
|
The aggregate intrinsic value of options exercisable as of March 31, 2024 was
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 stock.
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.
13
The following is a summary of changes in the status of non-vested RSUs during the three months ended March 31, 2024:
|
|
||||
Weighted |
|||||
Average |
|||||
Number of |
Grant Date |
||||
Awards |
Fair Value |
||||
Non-vested at December 31, 2023 |
|
|
$ |
|
|
Granted |
|
— |
— |
||
Vested |
|
— |
— |
||
Forfeited/Cancelled |
|
( |
|
||
Non-vested at March 31, 2024 |
|
|
$ |
|
For the three months ended March 31, 2024, the Company recorded $
As of March 31, 2024, there was $
Shares Available for Future Grant
At March 31, 2024, the Company has the following shares available to be granted under its equity incentive plans:
|
|
Inducement |
||
2023 Plan |
Plan |
|||
Available at December 31, 2023 |
|
|
|
|
Authorized |
|
— |
— |
|
Granted |
|
— |
— |
|
Shares withheld for taxes not issued |
— |
— |
||
Forfeited/Cancelled |
|
|
— |
|
Available at March 31, 2024 |
|
|
|
|
Shares Reserved for Future Issuance
At March 31, 2024, the Company has reserved the following shares of common stock for issuance:
Stock options outstanding under 2013 Plan |
|
|
Stock options outstanding under 2023 Plan |
|
|
Restricted stock units outstanding under 2013 Plan |
|
|
Stock options outstanding under Inducement Plan |
|
|
Warrants outstanding |
|
|
Total shares of common stock reserved for future issuance |
|
|
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
14
August 3, 2023, Vanguard exercised its second option to extend its sublease term. The Company and Vanguard agreed to further extend the sublease through May 2028. With the current extension to May 2028, Vanguard’s sublease is coterminous with the Company’s master lease term. 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) $
Supplemental balance sheet information related to leases was as follows (in thousands):
|
March 31, 2024 |
|
December 31, 2023 |
|||
Operating leases: |
|
|
|
|
||
Operating lease right-of-use assets |
|
$ |
|
|
$ |
|
|
|
|||||
|
|
|||||
$ |
|
$ |
|
|||
Finance leases: |
||||||
Property and equipment, at cost |
$ |
|
$ |
|
||
Accumulated depreciation |
( |
( |
||||
Property and equipment, net |
|
|
||||
|
|
|||||
|
|
|||||
$ |
|
$ |
|
The components of lease expense were as follows (in thousands):
Three Months Ended |
||||||
March 31, |
||||||
|
2024 |
|
2023 |
|||
Operating lease costs: |
||||||
Operating lease 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):
Three Months Ended |
||||||
March 31, |
||||||
|
2024 |
|
2023 |
|||
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
|
||
Operating cash flows from operating leases |
$ |
( |
$ |
( |
||
Financing cash flows from finance leases |
( |
|
( |
15
Our lease liabilities will mature, as follows (in thousands):
|
Operating Leases |
|
Financing Leases |
|||
2024 (April 1 - December 31) |
|
|
||||
2025 |
|
|
||||
2026 |
|
— |
||||
2027 |
|
— |
||||
2028 |
|
— |
||||
Total minimum lease payments |
$ |
|
$ |
|
||
Less: imputed interest |
( |
( |
||||
Lease liability |
$ |
|
$ |
|
Per the terms of our sublease, we expect the following inflows (in thousands):
|
Sublease |
||
2024 (April 1 - December 31) |
|
||
2025 |
|
||
2026 |
|
||
2027 |
|
||
2028 |
|
||
Total minimum lease payments |
$ |
|
Weighted average lease term and discount rates are as follows:
Three Months Ended March 31, |
||||||
|
2024 |
|
2023 |
|||
Weighted average remaining lease term (years) |
||||||
Operating leases |
||||||
Finance leases |
||||||
Weighted average discount rate |
||||||
Operating leases |
||||||
Finance leases |
8. 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.
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
16
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.
Sales-Related Deductions
The following table presents a roll forward of the major categories of sales-related deductions included in trade receivable allowances for the three months ended March 31, 2024 (in thousands):
|
Sales Discounts |
|
Chargebacks |
|
Fee for Service |
||||
Balance, January 1, 2024 |
$ |
|
|
|
|||||
Provision related to sales recorded in the period |
|
— |
|
|
|||||
Credits / payments during the period |
|
— |
( |
— |
|||||
Adjustments related to prior period sales |
|
— |
— |
— |
|||||
Balance, March 31, 2024 |
$ |
|
$ |
|
$ |
|
As of March 31, 2024, the Company’s outstanding accounts receivable of $
9. License and Royalty Revenue
License and Commercialization Agreement with Pharmbio Korea Inc.
In April 2018, the Company entered into an exclusive license agreement with Pharmbio Korea Inc., or Pharmbio, for the development and commercialization of OLINVYK for the management of moderate to severe acute pain in South Korea. Under the terms of the agreement, the Company received an upfront, non-refundable cash payment of $
In accordance with the terms of the agreement, Pharmbio is solely responsible for all development and regulatory activities in South Korea. The parties have formed a Joint Development Committee with equal representation from the Company and Pharmbio to provide overall coordination and oversight of the development of OLINVYK in South Korea. The parties also agreed to form a Joint Manufacturing and Commercialization Committee at least
License Agreement with Jiangsu Nhwa Pharmaceutical Co. Ltd.
In April 2018, the Company also entered into an exclusive license agreement with Jiangsu Nhwa Pharmaceutical Co. Ltd., or Nhwa, for the development and commercialization of OLINVYK for the management of moderate to severe acute pain in China. Under the terms of this agreement, the Company received an upfront, non-refundable cash payment of $
17
development and commercialization of the product in China. In the second quarter of 2018, Nhwa elected to exercise this manufacturing option. The license agreement is terminable by Nhwa for any reason upon
In accordance with the terms of the agreement, Nhwa is solely responsible for all development and regulatory activities in China. The parties have formed a Joint Development Committee with equal representation from the Company and Nhwa to provide overall coordination and oversight of the development of OLINVYK in China. The parties also formed a Joint Manufacturing and Commercialization Committee to provide overall coordination and oversight of the manufacture and commercialization of OLINVYK in China.
For the three months ended March 31, 2024 and 2023, there was no license and royalty revenue.
10. Net Loss Per Common Share
The following table sets forth the computation of basic and diluted net loss per share for the periods indicated (in thousands, except share and per share data):
Three Months Ended March 31, |
|||||||
|
2024 |
|
2023 |
|
|||
Basic and diluted net loss per common share calculation: |
|
|
|
|
|
||
Net loss |
$ |
( |
$ |
( |
|||
Weighted average common shares outstanding |
|
|
|
|
|||
Net loss per share of common stock - basic and diluted |
$ |
( |
$ |
( |
The pre-funded warrants to purchase common shares issued in connection with the December 2023 offering are included in the calculation of basic and diluted net loss per share as the exercise price of $
The following outstanding securities at March 31, 2024 and 2023 have been excluded from the computation of diluted weighted shares outstanding, as they would have been anti-dilutive:
March 31, |
||||
|
2024 |
|
2023 |
|
Options outstanding |
|
|
|
|
RSUs outstanding |
|
|
||
Warrants outstanding |
|
|
|
|
Total |
|
|
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes that appear in Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and related notes for the year ended December 31, 2023, which are included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on April 1, 2024. Unless the context otherwise requires, we use the terms “Trevena,” “Company,” “we,” “us” and “our” to refer to Trevena, Inc.
Overview
We are a biopharmaceutical company focused on developing and commercializing novel medicines for patients affected by central nervous system, or CNS, disorders. Our lead product, OLINVYK® (oliceridine) injection, or OLINVYK, was approved by the United States Food and Drug Administration (the “FDA”), in August 2020. In October 2020, we announced that OLINVYK had received scheduling from the U.S. Drug Enforcement Administration (the
18
“DEA”), and was classified as a Schedule II controlled substance. We initiated commercial launch of OLINVYK in the first quarter of 2021.
In April 2024, we announced that OLINVYK remains available for purchase by customers, but that we are reducing commercial support for the product to preserve capital as we conduct a process to explore a range of strategic alternatives for OLINVYK. Notwithstanding our reduction of commercial support for OLINVYK, which includes the elimination of our Chief Commercial Officer role, we continue to comply with all regulatory requirements, including post-marketing surveillance and reporting obligations. Potential strategic alternatives that may be explored or evaluated include, but are not limited to, a sale, license, divestiture or discontinuation of US commercial sales of OLINVYK. There can be no assurance regarding the schedule for completion of the strategic review process, that this strategic review process will result in the Company pursuing any transaction or that any transaction, if pursued, will be completed.
OLINVYK is an opioid agonist for use in adults for the management of acute pain severe enough to require an intravenous opioid analgesic and for whom alternative treatments are inadequate. We are also developing a pipeline of product candidates based on our proprietary product platform, including TRV045 for diabetic neuropathic pain, epilepsy, and seizure disorders; and TRV734 for moderate-to-severe acute and chronic pain and opioid use disorders.
Since our incorporation in late 2007, our operations have included organizing and staffing our company, business planning, raising capital, discovering and developing our product candidates, and establishing our intellectual property portfolio. We have financed our operations primarily through private placements and public offerings of our equity securities and debt borrowings. As of March 31, 2024, we had an accumulated deficit of $595.7 million. Our net loss was $7.7 million and $7.8 million for the three months ended March 31, 2024 and 2023, respectively. Our ability to become and remain profitable depends on our ability to generate revenue or sales. We do not expect to generate significant revenue or sales unless and until we or a collaborator successfully commercialize OLINVYK or obtain marketing approval for and successfully commercialize TRV045 or TRV734.
We expect to incur significant expenses and operating losses for the foreseeable future even as we reduce commercial support for OLINVYK and continue the development and clinical trials of our other product candidates. We will need to obtain substantial additional funding in connection with our continuing operations. We will seek to fund our operations through the sale of equity, debt financings or other sources, including potential strategic transactions, including collaborations. However, we may be unable to raise additional funds or enter into such other agreements when needed on favorable terms, or at all. If we fail to raise capital or enter into such other arrangements as, and when, needed, we may have to significantly delay, scale back or discontinue our operations, development programs, and/or any future commercialization efforts.
Recent Developments
Results of Special Meeting of Stockholders
On April 19, 2024, the Company held a special meeting of stockholders (the “Adjourned Meeting”), which was originally held on March 21, 2024 and adjourned (the “Original Meeting” and together with the Adjourned Meeting, the “Special Meeting”). At the Special Meeting, we sought stokcholder approval to, among other things, authorize, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of shares of our common stock underlying certain warrants issued by the Company in connection with the December 2023 Offering (the “Issuance Proposal”). At the Special Meeting, the Issuance Proposal was approved by a majority of the voting power of the outstanding shares of the Company’s common stock represented in person or by proxy and entitled to vote at the Special Meeting.
Compliance with Nasdaq Listing Requirements
As previously disclosed, on March 6, 2024, we received a letter from Nasdaq stating that, for the last 30 consecutive business days, the bid price for the Company’s common stock had closed below the minimum $1.00 per share required for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”) and that we were not eligible for a second 180-day extension period because the Company did not comply with the $5,000,000 minimum stockholders’ equity initial listing requirement for The Nasdaq Capital Market. As permitted under Nasdaq rules, we appealed Nasdaq’s determination and requested a hearing before a Nasdaq Hearings Panel (the “Panel”). The hearing took place on May 2, 2024 (the “Appeal Hearing”).
19
On April 5, 2024, we received an additional letter from Nasdaq notifying us that we no longer complied with the requirement under Nasdaq Listing Rule 5550(b)(1) to maintain a minimum of $2.5 million in stockholders’ equity for continued listing on the Nasdaq Capital Market (the “Equity Standard Requirement”). At the Appeal Hearing, we presented our plan to regain and maintain compliance with both the Minum Bid Price Requirement and the Equity Standard Requirement. All delisting actions were stayed pending a final decision by the Panel.
On May 13, 2024, we received a decision letter from the Panel granting us an extension until August 28, 2024, subject to certain conditions, to regain compliance with the Nasdaq continued listing requirements, including the Minimum Bid Price Requirement and Equity Standard Requirement. All delisting actions are stayed during the additional extension period granted by the Panel following the Appeal Hearing. While we are investigating a range of options available to us to regain compliance with the Minimum Bid Price Requirement and Equity Standard Requirement, there can be no assurance that we will be able to regain compliance with the Nasdaq continued listing requirements before dates required by Nasdaq or at all.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our consolidated financial statements, as well as the reported revenues and expenses during the reported periods. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Our significant accounting policies are more fully described in the notes to our audited consolidated financial statements for the year ended December 31, 2023 included in our Annual Report on Form 10-K. However, we believe that the following accounting policies are important to understanding and evaluating our reported financial results, and we have accordingly included them in this discussion.
Product Revenue
We account for product revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (ASC 606). We perform the following five steps to recognize revenue under ASC 606: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only recognize revenue when we believe that it is probable that we will collect the consideration to which we are entitled in exchange for the goods or services that will be transferred to the customer.
We sell OLINVYK to wholesalers in the US (collectively, “customers”). These customers subsequently resell our products generally to hospitals, ambulatory surgical centers and other purchasers of OLINVYK. We recognize revenue from OLINVYK sales at the point customers obtain control of the product, which generally occurs upon delivery. The transaction price that is recognized as revenue for products includes an estimate of variable consideration which is more fully described below.
Variable Consideration
We include an estimate of variable consideration in our transaction price at the time of sale when control of the product transfers to the customer. Variable consideration includes distributor chargebacks, prompt payment (cash) discounts, distribution service fees and product returns.
We assess whether or not an estimate of our variable consideration is constrained based on the probability that a significant reversal in the amount of cumulative revenue may occur in the future when the uncertainty associated with the variable consideration is subsequently resolved. Actual amounts of consideration ultimately received may vary from
20
our estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect product sales and earnings in the period such variances become known.
Distributor Chargebacks
When a product is sold to a third party that is subject to a contractual price agreement, the difference between the price paid to us by the wholesaler and the price under the specific contract is charged back to us by the wholesaler. Utilizing this information, we estimate a chargeback percentage for each product and record an allowance for chargebacks as a reduction to revenue when we record our sale of the products. We reduce the chargeback allowance when a chargeback request from a wholesaler is processed. Reserves for chargebacks are included in accounts receivable, net on the consolidated balance sheet.
Product Returns
Generally, our customers have the right to return any unopened product during the eighteen (18) month period beginning six (6) months prior to the labeled expiration date and ending twelve (12) months after the labeled expiration date. We do not currently rely on industry data in our analysis of returns reserve. As we sold OLINVYK and established historical sales over a longer period of time (i.e., two to three years), we placed more reliance on historical purchasing, demand from hospitals and ambulatory surgical centers, return patterns of our customers and the amount of OLINVYK held by wholesalers, when evaluating our reserves for product returns. OLINVYK has a forty-eight (48) month shelf life.
We recognize the amount of expected returns as a refund liability, representing the obligation to return the customer’s consideration. Since the returns primarily consist of expired and short dated products that will not be resold, we do not record a return asset for the right to recover the goods returned by the customer at the time of the initial sale (when recognition of revenue is deferred due to the anticipated return). Accrued product return estimates are recorded in accrued expenses and other current liabilities on the consolidated balance sheet.
Stock-Based Compensation
We have applied the fair value recognition provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation, or ASC 718, to account for stock-based compensation for employees. We recognize compensation costs related to stock options granted to employees based on the estimated fair value of the awards on the date of grant.
We have equity incentive plans under which various types of equity-based awards including, but not limited to, incentive stock options, non-qualified stock options, restricted stock unit awards and performance stock unit awards, may be granted to employees, non-employee directors, and non-employee consultants. We also have an inducement plan under which various types of equity-based awards, including non-qualified stock options and restricted stock unit awards, may be granted to new employees.
We recognize compensation expense on a straight-line basis over the requisite service period for all stock-based awards based on the estimated grant-date fair values. For restricted stock unit awards to employees, the fair value is based on the closing price of our common stock on the date of grant. The fair value of stock options is determined using the Black-Scholes option pricing model. We utilize a dividend yield of zero based on the fact that we have never paid cash dividends and have no current intention of paying cash dividends. We elected an accounting policy to record forfeitures as they occur.
See Note 6, included in Part 1, Item 1 of this Quarterly Report, for a discussion of the assumptions we used in determining the grant date fair value of options granted under the Black-Scholes option pricing model, as well as a summary of the stock option activity under our stock-based compensation plan for all years presented.
Loan Payable
In April 2022, an indirect subsidiary (“SPV2”) entered into a 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
21
milestone as set forth in the Loan Agreement. The third tranche of $15.0 million was received in August 2023 upon the first commercial sale of OLINVYK in China. In December 2023, we notified R-Bridge that we believed we had satisfied the conditions for the second tranche based on the achievement of the specified cumulative financing milestone. We are in discussions with R-Bridge with respect to the second tranche. However, there can be no assurance when, or if, we will receive the funds under the second tranche.
Under the relevant accounting guidance, the loan agreement has been accounted for as a debt instrument that will be amortized using the effective interest method over the life of the arrangement. In order to determine the amortization of the liability, we are required to estimate the total amount of future royalty payments to be paid to R-Bridge. Consequently, we impute interest on the unamortized portion of the liability and record interest expense related to the loan agreement accordingly. Due to the significant judgments and factors related to the estimates of future payments under the loan agreement, there are significant uncertainties surrounding the amount and timing of future payments and the related interest expense we recognize. We record non-cash interest expense within our consolidated statements of operations over the term of the loan agreement.
Recent Accounting Pronouncements
None.
Results of Operations
Comparison of the three months ended March 31, 2024 and 2023 (in thousands)
Three Months Ended |
||||||||||
March 31, |
||||||||||
|
2024 |
|
2023 |
|
Change |
|
||||
Revenue: |
|
|
|
|
|
|
|
|||
Product revenue |
$ |
20 |
$ |
6 |
$ |
14 |
||||
Total revenue |
20 |
6 |
14 |
|||||||
Operating expenses: |
|
|
|
|
|
|
||||
Cost of goods sold |
88 |
127 |
(39) |
|||||||
Selling, general and administrative |
|
5,845 |
|
6,089 |
|
(244) |
||||
Research and development |
|
3,965 |
|
3,909 |
|
56 |
||||
Total operating expenses |
|
9,898 |
|
10,125 |
|
(227) |
||||
Loss from operations |
|
(9,878) |
|
(10,119) |
|
241 |
||||
Other income (expense): |
|
|
|
|
|
|
||||
Change in fair value of warrant liability |
|
2,361 |
|
2,466 |
|
(105) |
||||
Other income, net |
|
4 |
|
9 |
|
(5) |
||||
Interest income |
|
353 |
|
289 |
|
64 |
||||
Interest expense |
|
(513) |
|
(446) |
|
(67) |
||||
Loss on foreign currency transactions |
(5) |
(18) |
13 |
|||||||
Total other income, net |
|
2,200 |
|
2,300 |
|
(100) |
||||
Net Loss |
$ |
(7,678) |
$ |
(7,819) |
$ |
141 |
||||
Unrealized loss on marketable securities |
— |
1 |
(1) |
|||||||
Comprehensive loss |
$ |
(7,678) |
$ |
(7,818) |
$ |
140 |
Revenue
We derive our revenue from providing OLINVYK to our customers and activities pursuant to our licensing agreements related to the development and commercialization of OLINVYK in China and South Korea. For the three months ended March 31, 2024, we recorded $20,000 in product revenue from the shipment of drug product to wholesalers. For the three months ended March 31, 2023, we recorded $6,000 in product revenue from the shipment of drug product to wholesalers.
For the three months ended March 31, 2024 and 2024 there was no license and royalty revenue.
22
As noted, in 2022 we recorded a returns reserve adjustment of $0.4 million for expected returns from our wholesalers. This adjustment was due, in part, to feedback we received in October 2022 from one of our wholesalers indicating that the wholesaler intended to return a significant portion of its supply of OLINVYK. As a result, we evaluated our returns reserves and updated our estimates to reflect this expected return, as well as potential increased probability of returns from our other wholesalers. In the fourth quarter of 2023, we recorded a returns reserve adjustment of $0.1 million for expected returns from our wholesalers. This adjustment was due, in part, on our evaluation of historical purchasing trends, the remaining expiry period of inventory held by our wholesalers and the potential increase in the probability of returns from our wholesalers.
As further background on our methodology with respect to returns reserves, every quarter since our launch of OLINVYK, we review the amounts of OLINVYK held at our wholesalers to evaluate the likelihood of expected product returns. In our analysis, we consider a range of factors including the level of sales from our wholesalers to hospitals, ambulatory surgical centers (“ASCs”) and other purchasers of OLINVYK, which our wholesalers report to us on a regular basis, as well as any new customer contracts. Based on information from our wholesalers, sales from our wholesalers to hospitals and ASCs, which we refer to as commercial sell through, have occurred, at a low level, every quarter since our commercial launch in February 2021. Commercial sell through of OLINVYK from our wholesalers to hospitals and ASCs for the three months ended March 31, 2024 was approximately $26,600. Commercial sell through from our wholesalers to hospitals and ASCs for the three months ended March 31, 2023 was approximately $15,000. While there is a general upward trend compared to the prior period, the overall level of these sales remains low and we do not expect this trend will continue as we reduce commercial support for OLINVYK.
In our returns reserve analysis, we also consider feedback from our wholesalers, group purchasing organizations and users of OLINVYK, as well as additional factors such as new safety data, or clinical or health economic data for OLINVYK that may affect future adoption and sales trends. Examples include OLINVYK data we announced in April 2022 with respect to respiratory physiology, and in July 2022 with respect to cognitive function. More recently in July 2023, we also announced OLINVYK data with respect to reduced cost per admission for hospitals and reduced average length of hospital stay, for OLINVYK-treated patients compared to matched patients treated with other IV opioids. We also consider factors that may negatively affect sales of OLINVYK, such as the price of OLINVYK compared to conventional IV opioids, which are generally generic and available at a lower initial cost relative to OLINVYK. Other factors may include the public perception of opioids in general, as well as the FDA’s and HHS’ policy initiatives that may limit the promotion and marketing of opioids.
We incorporate these factors as we consider the need for any adjustment for slow-moving or obsolete product on a quarterly basis.
23
Gross product revenue, and adjustments applied to calculate net product revenue, are set forth below (in thousands):
Three Months Ended |
|||||
March 31, |
|||||
2024 |
|
2023 |
|||
Product revenue, gross |
$ |
28 |
$ |
7 |
|
GTN Accruals |
|||||
Chargebacks and cash discounts |
(4) |
(1) |
|||
Returns |
(1) |
— |
|||
Other rebates, discounts and adjustments |
(3) |
— |
|||
Total GTN Accruals |
(8) |
(1) |
|||
Product revenue |
20 |
6 |
|||
Adjustments to prior period accruals |
|||||
Returns reserve |
— |
— |
|||
Other GTN accrual adjustments |
— |
— |
|||
Product revenue, net |
$ |
20 |
$ |
6 |
Cost of goods sold
Cost of goods sold for product revenue includes third party logistics costs, shipping costs, and indirect overhead costs which are recorded as period costs in the period incurred.
The following table provides information regarding cost of goods sold during the periods indicated, including percent changes (dollar amounts in thousands):
Three Months Ended March 31, |
|||||||
2024 |
2023 |
% Increase (Decrease) |
|||||
Cost of goods sold |
$ |
88 |
$ |
127 |
-31% |
Cost of goods sold decreased by less than $0.1 million for the three months ended March 31, 2024, compared to the same period in 2023, due to a reduction in indirect overhead costs.
Selling, general and administrative expense
Selling, general and administrative expenses consist principally of salaries and related costs for personnel in our executive, finance, commercial, and other administrative areas, including expenses associated with stock‑based compensation and travel. Other selling, general and administrative expenses include professional fees for legal, field sales organization, medical affairs, market research, consulting, and accounting services.
Selling, general and administrative expenses for the three months ended March 31, 2024 decreased by $0.2 million or 4%, as compared to the same period in 2023. The decrease was primarily related to a reduction in full time employees and a reduction in marketing activities offset by $0.8 million in severance and termination expense accruals in 2024.
Research and development expense
Research and development expenses consist primarily of costs incurred for research and the development of our product candidates, including costs associated with the regulatory approval process. In addition, research and development expenses include salaries and related costs for our research and development personnel and stock-based compensation expense and travel expenses for such individuals. Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than
24
those in earlier stages of clinical development, primarily due to the increased size, complexity and duration of later-stage clinical trials.
Research and development costs are expensed as incurred and are tracked by discovery program and subsequently by product candidate once a product candidate has been selected for development. We record costs for some development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or information provided to us by our vendors.
Research and development expenses increased by less than $0.1 million, or 1%, for the three months ended March 31, 2024, as compared to the same period in 2023. The following table summarizes our research and development expenses (in thousands):
Three Months Ended |
||||||
March 31, |
||||||
|
2024 |
|
2023 |
|||
TRV045 |
$ |
2,173 |