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 endedDecember 31, 2021 , which are included in our Annual Report on Form 10-K filed with theSecurities and Exchange Commission , orSEC , onMarch 31, 2022 . Unless the context otherwise requires, we use the terms "Trevena," "Company," "we," "us" and "our" to refer toTrevena, 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 theUnited States Food and Drug Administration , or the FDA, inAugust 2020 . InOctober 2020 , we announced that OLINVYK had received scheduling from theU.S. Drug Enforcement Administration , or DEA, and was classified as a Schedule II controlled substance. 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 initiated commercial launch of OLINVYK in the first quarter of 2021. Our commercial launch strategy is to focus on a subset of core specialties and clinically challenging patient, such as those patients with certain co-morbidities, elderly, obese or renal impairment. We intend to evolve and expand this focus as customers gain experience with OLINVYK. We are also developing a pipeline of product candidates based on our proprietary product platform, including TRV045 for diabetic neuropathic pain and epilepsy; TRV250 for acute migraines; and TRV734 for 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, establishing our intellectual property portfolio, and commercializing our lead product. We have financed our operations primarily through private placements and public offerings of our equity securities, debt borrowings and royalty-based financing. As ofJune 30, 2022 , we had an accumulated deficit of$525.5 million . Our net loss was$31.4 million and$23.9 million for the six months endedJune 30, 2022 and 2021, 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 commercialize TRV045, TRV250, or TRV734. We expect to incur significant expenses and operating losses for the foreseeable future as we continue to commercialize 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 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. 18 Table of Contents Recent Developments
OLINVYK demonstrated statistically significant reduced impact on neurocognitive functioning vs IV morphine on primary endpoint
InJuly 2022 , we reported positive topline results from our post-approval study designed to assess the impact on cognitive function in subjects treated with OLINVYK compared to IV morphine. On the primary endpoint, OLINVYK showed a statistically significant reduction in sedation versus IV morphine, measured by saccadic eye movement peak velocity, a sensitive laboratory measure of sedating action of medications. On several of the prespecified secondary outcome measures, OLINVYK showed a statistically significant difference or trend compared to IV morphine, despite the relatively small sample size, across a range of neurocognitive measures and motor performance. The study was a randomized, double-blind, placebo-controlled, dose-ranging design, in collaboration withthe Netherlands -basedCenter for Human Drug Research . Subjects received single intravenous doses of OLINVYK 1 mg and 3 mg, or morphine 5 mg and 10 mg, or placebo, using a partial-block crossover design. Twenty-three healthy subjects participated in the study, including 13 males and 10 females, with a median age of 26.
Entered into mult-year OLINVYK contract with
InJuly 2022 , we announced execution of a contract withVizient , which may allow for broad OLINVYK access for member hospitals.Vizient has coverage across US academic medical centers, acute care hospitals and ambulatory surgical centers. Trevena will work withVizient to educate its members on the clinical and health economic benefits of OLINVYK as an alternative to IV morphine.
Implemented strategic allocation of resources and cost reductions
InJuly 2022 , we announced an approximately 25% reduction in full-time employees and termination of our contract sales force agreement with Syneos. We maintain a focused internal commercial and medical affairs team supporting OLINVYK.
Registered Direct Offering of Preferred Stock
InJuly 2022 , we closed a registered direct offering with a single healthcare-focused institutional investor in which it issued 1,800 shares of Series A Preferred, 200 shares of Series B Preferred, and warrants exercisable to purchase up to an aggregate of 8,000,000 shares of common stock. Total gross proceeds from the Offering were$2.0 million . Each share of Preferred Stock has a stated value of$1,000 per share and a conversion price of$0.25 per share. The shares of Preferred Stock issued in the Offering are convertible into an aggregate of 8,000,000 shares of common stock. The warrants have an exercise price of$0.263 per share, will be exercisable beginning on the later of six months following the date of issuance and the effective date of a reverse stock split of our common stock in an amount sufficient to permit the exercise in full of the warrants, subject to stockholder approval of the Reverse Split Proposal, and will expire five and one-half years following the date of issuance. We also announced that we expect to call a special meeting of stockholders for the approval of the Reverse Split Proposal. The Series A Preferred has voting rights on the Reverse Split Proposal equal to the number of shares of common stock into which the Series A Preferred is convertible based on the minimum price under Nasdaq rules on the date of the securities purchase agreement, or$0.263 . The Series B Preferred has voting rights on the Reverse Split Proposal equal to 25,000,000 votes per share of Series B Preferred, provided that any votes cast by the Series B Preferred with respect to the Reverse Split Proposal must be counted in the same proportion as the shares of common stock and Series A Preferred voted on the Reverse Split Proposal. The shares of Preferred Stock were convertible at the option of the holder at any time following the date of issuance and were converted by the initial purchaser prior to the date of this Quarterly Report. COVID-19 The impact of the COVID-19 pandemic on the global economy and on our business continues to be a fluid situation. We responded quickly across our organization to guard the health and safety of our team and participants in our clinical trials, support our partners and vendors and mitigate risk. Thus far, our employees have rapidly adapted to working 19
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remotely and we are monitoring the COVID-19 pandemic on a daily basis to ensure we have all necessary plans in place for mitigating disruptions in our operations. Our commercial launch was impacted by the pandemic via a lack of traditional access to our customers and delayed formulary review processes. Many of our customers experienced capacity constraints as a result of COVID-19 and this frequently limited their ability to fully assess the clinical profile of OLINVYK. Like other companies, our clinical trials have experienced some degree of disruption due to access limitations to institutions currently impacted, and we may need to make further adjustments to clinical trials in the future to comply with evolving FDA guidance or otherwise. The extent to which the COVID-19 pandemic will impact our efforts to commercialize OLINVYK and to achieve market acceptance is uncertain and will depend upon future developments.
We continue to proactively assess, monitor and respond to domestic and international developments related to the COVID-19 pandemic, and we will implement risk-mitigation plans as needed to minimize the impact on our clinical trials and business operations, including our commercialization efforts of OLINVYK.
Senior Secured Tranched Term Loan Credit Facility
InSeptember 2014 , we entered into a loan and security agreement withOxford Finance LLC andPacific Western Bank (formerlySquare 1 Bank ), pursuant to which the lenders agreed to lend us up to$35.0 million in a three-tranche series of term loans, or the Term Loans. OnMarch 2, 2020 , we made our final payment under the loan and security agreement with the lenders. In connection with entering into the agreement, we issued to the lenders and the placement agent certain warrants to purchase an aggregate of 7,678 shares of our common stock. As ofJune 30, 2022 , warrants exercisable for 5,728 shares of common stock remain outstanding. These warrants were exercisable upon issuance and have an exercise price of$5.8610 per share. The warrants may be exercised on a cashless basis and will terminate on the earlier ofSeptember 19, 2024 or the closing of a merger or consolidation transaction in which we are not the surviving entity. In connection with our draw of the second term loan tranche, we issued to the lenders and the placement agent additional warrants to purchase an aggregate of 34,961 shares of our common stock. These warrants have substantially the same terms as those noted above and have an exercise price of$10.6190 per share and an expiration date ofDecember 23, 2025 . In connection with our draw of the third term loan tranche, we issued to the lenders and placement agent additional warrants to purchase an aggregate of 62,241 shares of our common stock. These warrants have substantially the same terms as those noted above and have an exercise price of$3.6150 per share and an expiration date ofMarch 31, 2027 . These detachable warrant instruments qualified for equity classification and were allocated based upon the relative fair value of the base instrument and the warrants, according to the guidance of ASC 470-20-25-2.
Critical Accounting Policies and Significant Judgments and Estimates
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. A summary of our significant accounting policies appears in the notes to our audited consolidated financial statements for the year endedDecember 31, 2021 included in our Annual Report. 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.
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. 20 Table of Contents 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, and restricted 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 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 value of the portion of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service period. 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. In connection with the early adoption of ASU 2016-09 in the quarter endedDecember 31, 2016 , 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.
Recent Accounting Pronouncements
See Note 2, included in Part 1, Item 1 of this Quarterly Report for information on recent accounting pronouncements.
Results of Operations
Comparison of the three and six months endedJune 30, 2022 and 2021 (in thousands) Three Months Ended Six Months Ended June 30, June 30, 2022 2021 Change 2022 2021 Change Revenue: Product revenue $ -$ 178 $ (178) $ -$ 387 $ (387) License revenue - - - 20 - 20 Total revenue - 178 (178) 20 387 (367) Operating expenses: Cost of goods sold 216 258 (42) 423 421 2 Selling, general and administrative 10,306 10,545 (239) 21,320 17,913 3,407 Research and development 4,291 3,449 842 9,550 6,085 3,465 Total operating expenses 14,813 14,252 561 31,293 24,419 6,874 Loss from operations (14,813) (14,074) (739) (31,273) (24,032) (7,241) Other income (expense): Change in fair value of warrant liability - 2 (2) - 5 (5) Other income, net 64 7 57 109 76 33 Interest income 95 43 52 119 91 28 Interest expense (325) - (325) (325) - (325) Loss on foreign currency exchange (2) - (2) - (4) 4 Total other income (expense), net (168) 52 (220) (97) 168 (265) Net Loss$ (14,981) $ (14,022) $ (959) $ (31,370) $ (23,864) $ (7,506) Revenue To date, we have derived revenue mainly from activities pursuant to our licensing agreements related to the development and commercialization of OLINVYK inChina andSouth Korea . For the three and six months endedJune 30, 2022 , we recorded no product revenue. For the three and six months endedJune 30, 2021 , we recorded$0.2 million and$0.4 million , respectively, in product revenue from the shipment of drug product to wholesalers. 21 Table of Contents 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. We expensed the cost of producing validation batches of OLINVYK that we are using in the commercial launch as research and development expense prior to the regulatory approval and DEA scheduling of OLINVYK. We expect cost of sales to increase as we deplete these inventories.
The following table provides information regarding cost of goods sold during the periods indicated, including percent changes (dollar amounts in thousands):
Three Months Ended June 30, Six Months Ended June 30, 2022 2021 % Increase (Decrease) 2022 2021 % Increase (Decrease)
Cost of goods sold $ 216$ 258 -16% $ 423$ 421 0% Cost of goods sold decreased by less than$0.1 million and increased less than$0.1 million for the three and six months endedJune 30, 2022 , respectively, compared to the same periods in 2021, primarily related to distribution and indirect costs following the regulatory approval and DEA scheduling of OLINVYK.
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 stockbased 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 endedJune 30, 2022 decreased by$0.2 million , or 2%, as compared to the same period in 2021, and increased by$3.4 million , or 19%, for the six months endedJune 30, 2022 as compared to the same period in 2021. The increase was primarily related to increases in commercialization activities.
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 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$0.8 million , or 24%, for the three months endedJune 30, 2022 , as compared to the same period in 2021, and increased by$3.5 million , or 57%, for the six months endedJune 30 , 22
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2022 as compared to the same period in 2021. The following table summarizes our research and development expenses (in thousands):
Three Months Ended Six Months Ended June 30, June 30, 2022 2021 2022 2021 Personnel-related costs$ 1,651 $ 1,367 $ 3,322 $ 2,644 OLINVYK 1,079 421 2,325 606 TRV027 (61) 114 300 223 TRV045 871 1,058 1,916 1,953 TRV250 151 222 579 197
Other research and development 600 267 1,108
462$ 4,291 $ 3,449 $ 9,550 $ 6,085
The higher research and development expenses incurred during the three and six months endedJune 30, 2022 compared to the same period in 2021 were the result of increased spend on OLINVYK post-approval clinical studies in respiratory physiology and cognitive function.
Total other income (expense), net
Total other income (expense), net for the three and six months endedJune 30, 2022 was higher than the same periods in prior year primarily because of higher interest expense.
Liquidity and Capital Resources
We have historically funded substantially all of our operations through the sale and issuance of our equity securities, debt securities and borrowings under debt facilities. We have also received an aggregate of$8.8 million pursuant to licensing agreements for the development and commercialization of OLINVYK inChina andSouth Korea . AtJune 30, 2022 , we had an accumulated deficit of$525.5 million , working capital of$46.3 million , cash and cash equivalents of$19.6 million , restricted cash of$2.9 million , and marketable securities of$29.9 million . InNovember 2020 , we filed a$250.0 million shelf registration statement, which includes the HCW ATM Program, of which there was approximately$41.9 million of available capacity as ofJune 30, 2022 . Our primary use of cash is to fund operating expenses, which consist of research and development expenditures, commercialization expenditures, and other selling, general and administrative expenditures. These expenses have increased in the three and six months endedJune 30, 2022 as compared to the same periods in 2021 as a result of the commercial launch of OLINVYK. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in accounts payable and accrued expenses. Net cash used in operating activities was$30.2 million and$26.5 million for the six months endedJune 30, 2022 and 2021, respectively. We incurred net losses of$31.4 million and$23.9 million for those same periods.
Cash Flows
The following table summarizes our cash flows for the six months ended
June
30,
2022
2021
Net cash (used in) provided by: Operating activities$ (30,207) $ (26,458) Investing activities (29,976) - Financing activities 14,449 8,007
Net decrease in cash, cash equivalents and restricted cash
$ (18,451) 23 Table of Contents
Net cash used in operating activities
Net cash used in operating activities was$30.2 million for the six months endedJune 30, 2022 and consisted primarily of a net loss of$31.4 million and changes in operating assets and liabilities of$1.5 million , partially offset by stock-based compensation of$2.2 million and depreciation expense of$0.2 million . Changes in prepaid expenses and other assets, accounts payable and accrued expenses result from timing differences between the receipt and payment of cash and when the transactions are recognized in our results of operations. Net cash used in operating activities was$26.5 million for the six months endedJune 30, 2021 and consisted primarily of a net loss of$23.9 million and changes in operating assets and liabilities of$4.5 million , partially offset by stock-based compensation of$2.3 million and depreciation expense of$0.2 million . Changes in prepaid expenses and other assets, accounts payable and accrued expenses result from timing differences between the receipt and payment of cash and when the transactions are recognized in our results of operations.
Net cash used in investing activities
Net cash used in investing activities was
Net cash provided by financing activities
Net cash provided by financing activities was$14.5 million for the six months endedJune 30, 2022 , which was due to proceeds from the Loan Agreement. Net cash provided by financing activities was$8.0 million for the six months endedJune 30, 2021 , which was primarily due to net proceeds of$7.9 million from the HCW ATM Program.
Operating and Capital Expenditure Requirements
We have not achieved profitability since our inception, and we expect to continue to incur net losses and negative cash flows from operations for the foreseeable future. We expect our cash expenditures to continue to be significant in the near term as we continue to commercialize OLINVYK, and continue to advance TRV045 and TRV250. Over the next twelve months, we anticipate that our total operating expenses will decrease compared to the previous twelve months.
We believe that our cash and cash equivalents as ofJune 30, 2022 , together with interest thereon, will be sufficient to fund our operating expenses and capital expenditure requirements to mid-2023, but not for more than one year after the date of this filing and as a result, there is substantial doubt about our ability to continue as a going concern through the year from the date of this filing. Our anticipated operating expenses involve significant risks and uncertainties and are dependent on our current assessment of the extent and costs of activities required to commercialize OLINVYK and advance our other product candidates. In the future, we anticipate that we will need to raise substantial additional financing to fund our operations. To meet these requirements, we may seek to sell equity or convertible securities in public or private transactions that may result in significant dilution to our stockholders. We may offer and sell shares of our common stock under the existing registration statement or any registration statement we may file in the future. If we raise additional funds through the issuance of convertible securities, these securities could have rights senior to those of our common stock and could contain covenants that restrict our operations.
Ultimately, there can be no assurance that we will be able to obtain additional equity or debt financing on terms acceptable to us, if at all. Our future capital requirements will depend on many factors, including:
? our ability to successfully commercialize OLINVYK and our other product
candidates;
our ability to generate sales and other revenues from OLINVYK or any of our
? other product candidates, once approved, including setting an acceptable price
for and obtaining adequate coverage and hospital formulary acceptance of such
products;
? the size and growth potential of the markets for OLINVYK and our ability to serve those markets; 24 Table of Contents
the scope, progress, results and costs of researching and developing our
? product candidates or any future product candidates, both in
and in territories outside
? the number and development requirements of any other product candidates that we
may pursue;
? our ability to enter into collaborative agreements for the development and/or
commercialization of our product candidates, including for OLINVYK;
the costs, timing, and outcome of any regulatory review of OLINVYK and any
? future product candidates, both in
the costs, timing, and extent of future commercialization activities, including
? product manufacturing, marketing, sales and distribution, for any of our
product candidates for which we receive marketing approval;
? the revenue, if any, received from commercial sales of our product candidates
for which we receive marketing approval;
? any product liability or other lawsuits, including the recently filed class
action complaints, related to our products or us;
? the expenses needed to attract and retain skilled personnel; and
the costs involved in preparing, filing and prosecuting patent applications,
? maintaining and enforcing our intellectual property rights and defending our
intellectual property-related claims, both in
territories outside
Please see "Risk Factors" section of this Quarterly Report and our Annual Report for additional risks associated with our substantial capital requirements.
Other Commitments
In the course of normal business operations, we have agreements with contract service providers to assist in the performance of our research and development and manufacturing activities. We can elect to discontinue the work under these agreements at any time. We also could enter into additional collaborative research, contract research, manufacturing and supplier agreements in the future, which may require upfront payments and even long-term commitments of cash.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, as defined by applicable
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