Annual report pursuant to Section 13 and 15(d)

Stockholders' Equity

v3.20.1
Stockholders' Equity
12 Months Ended
Dec. 31, 2019
Stockholders' Equity  
Stockholders' Equity

7. Stockholders’ Equity

Equity Offerings

ATM Programs

Under its certificate of incorporation, the Company was authorized to issue up to 200,000,000 shares of common stock as of December 31, 2019 and December 31, 2018. The Company also was authorized to issue up to 5,000,000 shares of preferred stock as of each of December 31, 2019 and December 31, 2018. The Company is required, at all times, to reserve and keep available out of its authorized but unissued shares of common stock sufficient shares to effect the conversion of the shares of the preferred stock and all outstanding stock options and warrants.

On December 14, 2015, the Company entered into an at-the-market, or ATM, sales agreement with Cowen and Company, LLC, or Cowen, to offer and sell, from time to time at the Company’s sole discretion, shares of its common stock, having an aggregate offering price of up to $75.0 million through Cowen as its sales agent, or the First ATM Program. Sales under the First ATM Program were deemed to be “at-the-market offerings,” as defined in Rule 415 under the Securities Act of 1933, as amended, or the Securities Act. Under the First ATM Program, the Company was required to pay Cowen a commission of up to three percent of the gross sales proceeds and provided Cowen with customary indemnification rights. In 2018, the Company issued and sold 11.4 million shares of common stock under the First ATM Program. The net offering proceeds to the Company in 2018 for sales under the First ATM Program were approximately $20.0 million after deducting related expenses, including commissions. Sales of common stock under the First ATM Program terminated on June 29, 2018 when the Company’s Registration Statement on Form S-3 (File No. 333-225685) was declared effective by the SEC. Accordingly, as of December 31, 2019, there was no remaining capacity available under this ATM facility.

In June 2018, the Company filed a $175.0 million shelf registration statement on Form S-3 (File No. 333-225685), or the Shelf Registration Statement, that included an ATM sales facility to offer and sell, through Cowen, from time to time at the Company’s sole discretion, shares of its common stock having an aggregate offering price of up to $50.0 million, or the Second ATM Program. Sales of the shares are deemed to be “at-the-market offerings,” as defined in Rule 415 under the Securities Act. During 2018, the Company sold approximately 8.5 million shares of its common stock under the Second ATM Program, which yielded net proceeds to the Company of approximately $13.2 million after deducting related expenses, including commissions. The Company terminated sales under the Second ATM Program on April 17, 2019, and the remaining capacity was added back to the aggregate amount available under the Shelf Registration Statement. Accordingly, as of December  31, 2019, there was no remaining capacity available under the Second ATM Program.

On April 17, 2019, the Company entered into a Common Stock Sales Agreement with H.C. Wainwright & Co., LLC, or Wainwright, pursuant to which the Company may offer and sell through Wainwright, from time to time at the Company’s sole discretion, shares of its common stock, having an aggregate offering price of up to $50.0 million, or the HCW ATM Program. Sales of the shares of common stock are deemed to be “at-the-market offerings,” as defined in Rule 415 under the Securities Act. The Company intends to use the net proceeds from the offering primarily for the development of its lead product candidate, oliceridine, and for general corporate purposes. In 2019, the Company issued and sold approximately 1.4 million shares of common stock under the HCW ATM Program. The net offering proceeds to the Company in 2019 for sales under the HCW ATM Program were approximately $1.1 million after deducting related expenses, including commissions. As of December 31, 2019, there was approximately $48.9 million remaining available for future issuances under the HCW ATM Program.

Registered Direct Offering and Concurrent Warrant Issuance

On January 29, 2019, the Company entered into securities purchase agreements with two institutional investors wherein the Company agreed to sell to the investors an aggregate of 10,000,000 shares of its common stock, at an offering price of $1.00 per share, in a registered direct offering made pursuant to the Registration Statement. The net proceeds to the Company from the offering were approximately $9.2 million, after deducting fees and the expenses of the placement agent. Pursuant to a letter agreement dated January 28, 2019, the Company engaged Wainwright to act as its exclusive placement agent in connection with the issuance and sale of the shares. The Company paid Wainwright 7.0% of the aggregate gross proceeds in the offering and $50,000 for certain expenses, and it issued warrants to purchase 500,000 shares of common stock to certain designees of Wainwright. These warrants have a term of five years, are immediately exercisable and have an exercise price of $1.25 per share. The warrants are classified as equity and recorded at fair value as of the date of issuance and no further adjustments to their valuation are made. The letter agreement also includes indemnification obligations of the Company and other provisions customary for transactions of this nature.

Equity Incentive Plans

In 2008, the Company adopted the 2008 Equity Incentive Plan, as amended on February 29, 2008, January 7, 2010, July 8, 2010, December 10, 2010, June 23, 2011 and June 17, 2013, collectively, the 2008 Plan, that authorized the Company to grant restricted stock and stock options to eligible employees, directors and consultants to the Company.

In 2013, the Company adopted the 2013 Equity Incentive Plan, as amended on May 14, 2014, collectively, 2013 Plan. The 2013 Plan became effective upon the Company’s entry into the underwriting agreement related to its IPO in January 2014 and, as of such date, no further grants were permitted under the 2008 Plan. The 2013 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards and other forms of equity compensation (collectively, stock awards), all of which may be granted to employees, including officers, non-employee directors and consultants of the Company. Additionally, the 2013 Plan provides for the grant of cash and stock-based performance awards. The 2013 Plan contains an “evergreen” provision, pursuant to which the number of shares of common stock available for issuance under the plan automatically increases on January 1 of each year beginning in 2015.

On December 15, 2016, the Company adopted the Trevena, Inc. Inducement Plan, or the Inducement Plan, effective January 1, 2017, pursuant to which the Company reserved 500,000 shares of the Company’s common stock for issuance under the Inducement Plan. The Plan provides for nonstatutory stock options and restricted stock unit awards. The only persons eligible to receive grants of awards under the Inducement Plan are individuals who satisfy the standards for inducement grants under Nasdaq Marketplace Rule 5635(c)(4) and the related guidance under Nasdaq IM 5635‑1, including individuals who were not previously an employee or director of the Company or are following a bona fide period of non-employment, in each case as an inducement material to such individual’s agreement to enter into employment with the Company.

Under all Plans, the amount, terms of grants and exercisability provisions are determined by the board of directors or its designee. The term of the options may be up to 10 years, and options are exercisable in cash or as otherwise determined by the board of directors or its designee. Vesting generally occurs over a period of not greater than four years. For performance-based stock awards, the Company recognizes expense when achievement of the performance factor is probable, over the requisite service period.

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):

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 

 

    

2019

    

2018

    

2017

Research and development

 

$

825

 

$

1,077

 

$

1,954

General and administrative

 

 

2,407

 

 

3,290

 

 

4,433

Total stock-based compensation

 

$

3,232

 

$

4,367

 

$

6,387

 

Stock Options

A summary of stock option activity and related information from December 31, 2017 through December 31, 2019 follows:

 

 

 

 

 

 

 

 

 

 

Options Outstanding

 

    

 

    

 

 

    

Weighted 

 

 

 

 

 

 

 

Average 

 

 

 

 

Weighted 

 

Remaining 

 

 

 

 

Average 

 

Contractual 

 

 

Number of 

 

Exercise 

 

Term 

 

 

Shares

 

Price

 

(in years)

Balance, December 31, 2017

 

8,624,223

 

$

5.22

 

7.17

Granted

 

4,065,375

 

 

1.70

 

 

Exercised

 

(132,952)

 

 

0.63

 

 

Forfeited/Cancelled

 

(4,291,439)

 

 

(4.38)

 

 

Balance, December 31, 2018

 

8,265,207

 

$

3.99

 

6.99

Granted

 

1,033,000

 

 

1.10

 

 

Exercised

 

(41,968)

 

 

0.68

 

 

Forfeited/Cancelled

 

(1,687,935)

 

 

(4.94)

 

 

Balance, December 31, 2019

 

7,568,304

 

$

3.40

 

7.01

Vested or expected to vest at December 31, 2019

 

7,568,304

 

$

3.40

 

7.01

Exercisable at December 31, 2019

 

4,259,251

 

$

4.24

 

5.92

 

The intrinsic value of the options exercisable as of December 31, 2019 was $0.1 million, based on the Company’s closing stock price of $0.84 per share and a weighted average exercise price of $4.24 per share.

On February 28, 2018, the Company granted 1,803,625 stock options to employees. The awards vest 50% upon the date on which FDA approves the Company’s new drug application for OLINVO injection, and the remaining 50% vest annually over a 4-year period beginning on the grant date. No compensation expense has been recognized for the awards which vest upon FDA approval as these shares are performance based and the triggering event was not determined to be probable as of December 31, 2019. As of December 31, 2019 and 2018, the total unrecognized compensation expense related to the nonvested and nonforfeited shares was $0.1 million.

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 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.

The per-share weighted average grant date fair value of the options granted to employees and directors during the year ended December 31, 2019, 2018 and 2017 was estimated at $0.86,  $1.13 and $2.68 per share, respectively, on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 

 

 

    

2019

    

2018

    

2017

 

Expected term of options (in years)

 

6.1

 

5.8

 

6.2

 

Risk-free interest rate

 

1.9

%  

2.8

%  

2.0

%

Expected volatility

 

98.9

%  

71.7

%  

75.6

%

Dividend yield

 

 —

%  

 —

%  

 —

%

 

The weighted average valuation assumptions were determined as follows:

·

Risk‑free interest rate: The Company based the risk‑free interest rate on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected option term.

·

Expected term of options: Due to its lack of sufficient historical data, the Company estimates the expected life of its employee stock options using the “simplified” method, as prescribed in Staff Accounting Bulletin No. 107, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option.

·

Expected stock price volatility: The Company estimates the expected volatility based on the actual historical volatility of the Company’s stock price using daily closing prices over a period of the expected term of the associated award. Prior to January 1, 2018, the Company estimated the expected volatility based on actual historical volatility of the stock price of similar companies with publicly‑traded equity securities.

·

Expected annual dividend yield: The Company estimated the expected dividend yield based on consideration of its historical dividend experience and future dividend expectations. The Company has not historically declared or paid dividends to stockholders. Moreover, it does not intend to pay dividends in the future, but instead expects to retain any earnings to invest in the continued growth of the business. Accordingly, the Company assumed an expected dividend yield of 0.0%.

·

Estimated forfeiture rate: The Company elected to record forfeitures upon occurrence, rather than utilizing an estimate.

As of December 31, 2019, there was $2.9 million of total unrecognized compensation expense related to unvested stock options that will be recognized over the weighted average remaining period of 1.94 years.

Restricted Stock Units

On December 5, 2019, the Company granted 2,170,585 restricted stock units, or RSUs, to employees. The units vest subject to the satisfaction of service requirements as follows: 50% vest on December 5, 2020,  and 50% vest on December 5, 2021. The fair market value per RSU is $0.72, which is equal to the closing price of the Company’s common stock on the date of the grant.

On December 6, 2018, the Company granted 1,255,000 RSUs to employees. The units vest subject to the satisfaction of service requirements as follows: 25% vested on June 1, 2019, 25% vested on December 1, 2019, and the remaining vest on December 6, 2020. The fair market value per RSU is $0.65, which is equal to the closing price of the Company’s common stock on the date of the grant.  

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.

There were 166,407 shares of common stock underlying vested RSUs that were withheld during the year ended December 31, 2019, based on the value of the RSU awards as determined by the Company’s closing stock price on the applicable vesting date. The shares withheld for taxes are again available for issuance under the plan.

The following is a summary of changes in the status of non-vested RSUs:

 

 

 

 

 

 

 

    

 

    

 

 

 

 

 

 

Weighted 

 

 

 

 

Average 

 

 

Number of 

 

Grant Date

 

 

Awards

 

Fair Value

Non-vested at December 31, 2017

 

 —

 

$

 —

Granted

 

1,255,000

 

 

0.65

Exercised

 

 —

 

 

 —

Forfeited/Cancelled

 

 —

 

 

 —

Non-vested at December 31, 2018

 

1,255,000

 

$

0.65

Granted

 

2,500,585

 

 

0.74

Vested

 

(572,500)

 

 

0.65

Forfeited

 

(237,500)

 

 

0.65

Non-vested at December 31, 2019

 

2,945,585

 

$

0.73

 

For the years ended December 31, 2019 and 2018, the Company recorded $0.5 million and less than $0.1 million, respectively, in stock-based compensation expense related to RSUs, which is reflected in the statements of operations and comprehensive loss.

As of December 31, 2019, there was $2.0 million of total unrecognized compensation expense related to unvested RSUs that will be recognized over the weighted average remaining period of 1.96 years.  

Shares Available for Future Grant

At December 31, 2019, the Company has the following shares available to be granted:

 

 

 

 

 

 

    

 

    

Inducement 

 

 

2013 Plan

 

Plan

Available at December 31, 2018

 

2,603,983

 

144,125

Authorized

 

3,459,343

 

 —

Granted

 

(3,533,585)

 

 —

Forfeited/Cancelled

 

1,864,560

 

60,875

Available at December 31, 2019

 

4,394,301

 

205,000

 

Shares Reserved for Future Issuance

At December 31, 2019, the Company has reserved the following shares of common stock for issuance:

 

 

 

Stock options outstanding under 2013 Plan

    

7,273,304

Restricted stock units outstanding under 2013 Plan

 

2,945,585

Shares reserved for future issuance under 2013 Plan

 

4,394,301

Stock options outstanding under Inducement Plan

 

295,000

Shares reserved for future issuance under Inducement Plan

 

205,000

Shares reserved for future issuance under 2013 Employee Stock Purchase Plan

 

225,806

Warrants outstanding

 

623,091

Total shares of common stock reserved for future issuance

 

15,962,087